LONDON: Oil prices slipped on Thursday as investors questioned whether an OPEC agreement to curb production - the group's first such deal since 2008 - would be enough to rebalance a heavily over-supplied market.
The Organization of the Petroleum Exporting Countries agreed on Wednesday to cut output to 32.5-33.0 million barrels per day (bpd) from around 33.5 million bpd, estimated by Reuters to be the output level in August. Prices rose 6 percent on Wednesday, feeding general risk appetite and boosting energy shares.
The European oil and gas index was up 4 percent on Thursday and the pan-European STOXX 600 index rose 2 percent.
But oil prices retreated as scepticism over the effectiveness of the deal led to profit taking.
Benchmark Brent crude futures were down 11 cents a barrel at $48.58 by 1339 GMT, after earlier climbing to a high of $49.09, its strongest since Sept. 9. Brent settled up $2.72 a barrel, or 5.9 percent, on Wednesday.
US light crude oil was up 7 cents at $47.12 a barrel, after first hitting $47.47, its highest since Sept. 8.
Many analysts said there was a lack of clarity over too many details and there was a risk the deal could unravel. "With such uncertainty around the minutiae, we expect uncommon volatility in the oil market until OPEC's November meeting," analysts at ING said.
It is not clear when the agreement would come into effect, how compliance with the agreement will be verified, what new quotas for countries would be and how long the deal would remain in effect, analysts said.
Moreover, if oil prices were to rise, it could also lead to a surge in non-OPEC output, they said.
OPEC will decide how much each country will produce at its next formal meeting in November, when an invitation to join the cuts could also be extended to non-OPEC countries such as Russia.
US bank Goldman Sachs expects the OPEC deal to add $7-$10 to oil prices in the first half of 2017.
"We think that OPEC is running a dangerous game if the aim is to push the crude oil price higher from here in the short term as it would just activate more US shale oil production," said Bjarne Schieldrop, chief commodity analyst at Nordic bank SEB.
And a cut in OPEC production might do little to reduce oversupply, given uncertainty about output from Iran, Libya and Nigeria. "The problem of surpluses will not be solved if these countries take full advantage of their capacities," Commerzbank chief commodities analyst Eugen Weinberg said.
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