BCS Barclays PLC

Oil prices retreated after OPEC's production deal briefly sent the market to its highest price since early July.

U.S. crude for November delivery recently lost 32 cents, or 0.7%, to $47.90 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 29 cents, or 0.6%, to $49.90 a barrel on ICE Futures Europe.

Traders and money managers have been buoyed by the prospect of coordinated action to reduce output to between 32.5 million and 33 million barrels a day from the Organization of the Petroleum Exporting Countries since the members' met in Algeria. However, several market observers believe that the OPEC deal still has a way to go before it delivers on its early promise.

New York-based Morgan Stanley said the risk of disappointment over the deal is high, and that it is unclear whether the agreement isn't just aimed at settling the nerves of a jittery market for another couple of months. It added that more discussions were needed, particularly with major non-OPEC producers such as Russia, to ensure that positive sentiment won over the past week isn't quickly lost.

With many now waiting to see how the deal plays out, day traders who move based on charts and momentum have retaken hold of the market, a trader and broker said. After nearly a week of sharp rises for oil, gasoline and diesel futures, those technical traders noted that the momentum had waned, said Ric Navy, senior vice president for energy futures at brokerage R.J. O'Brien & Associates LLC.

"We're stalling at the August highs," he added. "It says we could correct lower."

Traders are also monitoring Hurricane Matthew and its threat to oil facilities in the Gulf of Mexico. And U.S. stocks fell slightly across the board to start Monday trading.

There are long-term concerns about OPEC, too. The U.K.'s Barclays said that the deal meant expectations have now been raised and any doubts as to the ability of OPEC to curb production offered serious downside potential for prices over the coming weeks.

With so much resting on OPEC, other analysts were quick to damp any overly enthusiastic price forecasts for the rest of 2016.

The London-based Energy Aspects said that short- to midterm supply and demand fundamentals make it unlikely that prices will rise beyond the $50-$55 a barrel bracket. The think tank also warned that production cuts from the cartel were the only real solution to a swifter rebalancing of the supply-demand equilibrium.

"With non-OPEC supplies already falling by the wayside, there is little rebalancing that can occur outside of OPEC," Energy Aspects said in a note.

Meanwhile in the U.S., the oil rig count increased by seven rigs to total 425 last week according to the oil-field services company Baker Hughes, the 14th weekly increase in the last 15 weeks, though the rise in activity has still not had any major impact on U.S. production.

In refined product markets, gasoline futures were down 1.4% at $1.4432 a gallon, and diesel futures were down 0.7% at $1.527 a gallon.

Write to Kevin Baxter at Kevin.Baxter@wsj.com and Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

October 03, 2016 12:35 ET (16:35 GMT)

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