Oil reaches 1-month high, but OPEC-driven rally loses momentum

Oil prices extended gains on Thursday, although the advance lost momentum during the last hours as euphoria over an OPEC deal to cut output began to fade.

On Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) agreed to reduce output to between 32.5-33 million barrels per day from around 33.5 million barrels per day estimated in August. It was the first time that OPEC has agreed to cut production since during the global financial crisis in 2008. OPEC said other details of the plan - timing, member’s quotas, etc - will be revealed at its policy meeting in November.

However, some analysts estimate that even if the OPEC cuts production by 700K bpd, the global crude oversupply is estimated at between 1.0-1.5 million bpd.

Crude oil rose to a 1-month high of $48.55 on Thursday and it was last trading up 1.08% at $47.90 a barrel. Moreover, higher oil prices could boost non-OPEC output, such as US shale oil.