Oil giants BP and Royal Dutch Shell topped the FTSE 100 as investors cheered news that Opec has agreed to cut output for the first time since 2008.
The FTSE 100 was 0.6% lower at around 6740.49 points, despite BP jumping 2.6% and Royal Dutch Shell’s B shares rising 2.6% in early trading.
Sterling was trading higher by 0.2% against the US dollar at 1.253, and 0.1% lower against the euro at 1.179.
Brent crude prices continued to climb, rising 1.7% to around 52.37 US dollars a barrel (£41.78) after Opec announced it had reached a deal to cut production on Wednesday by around 1.2 million barrels a day to a total production of 32.5 million barrels per days from January 1 2017.
The move is expected to push up prices, which have tumbled more than 50% since their June 2014 peak amid a growing supply glut.
But sceptics warn there are challenges ahead.
Dominic Rossi, global chief investment officer for equities at Fidelity International, said: “I would not get too excited by the Opec cut.
“Compliance will be a problem, and the Russians will pump more gas instead. In the meantime, the long-run marginal cost of US shale continues to fall. I would not chase this oil price rally too hard.”
Meanwhile, the UK market shrugged off news of lower-than-expected factory activity after the Markit/CIPS manufacturing purchasing manager’s index (PMI) for November came in below expectations for 54.5 at 53.4.
Across Europe, the French Cac 40 and German Dax were trading lower by around 0.5% and 0.6% respectively.
In UK stocks, Centrica shares fell 1.3% after British Gas announced a price freeze for more than six million customers on standard tariffs that will run until at least March 2017.
Shares in Daily Mail and General Trust – the publisher behind the Daily Mail, Mail on Sunday and freesheet Metro – have jumped 6.8% after posing a 14% rise in full-year pre-tax profits to £247 million.
However, the company warned that the vote to quit the EU represents a risk to the business, if slowing economic growth results in a drop in advertising revenues.
Shares in McColl’s rose 1.8% after the retail chain notched up its sixth straight year of rising sales and hit its target for 1,000 convenience stores across the UK.
The group posted a 1.9% rise in sales over the year to November 27.