The first OPEC cut in oil production since 2008 sent markets surging on Thursday, lifting the price of oil between 6 and 7 percent.
The landmark agreement is the first of its kind in eight years, with the Organisation of the Petroleum Exporting Countries saying they would reduce output to a range of 32.5 million-33.0 million per day, a decrease of around 0.7-2.2%.
Brent crude was up at $2.72 (5.9%), at $48.69 a barrel, which marks a more than two-week high of $48.96. Additionally, US West Texas Intermediate (WTI) crude jumped to 5.3%, to settle at $47.05, after a peak $47.45, its highest since 8th September.
OPEC is a 14-nation cartel that supplies most of the world’s crude oil supplies. This is the first time that the group have signalled a move in support of oil since the downturn in crude oil prices.
Similarly, the deal has also stimulated a bounce for certain world currencies. The dollar surged 1% against the yen amidst the news, its strongest rise since September 21st. The Australian dollar was also at a three year high of $0.7711.
The deal also led to a lift for various US energy company stocks. Shares in Exxon mobil reached 4.4pc and Chevron rose to around 32.pc.
The OPEC deal marks a significant development in relations between Iran and Saudi Arabia. Up until recently Iran has been subject to sanctions preventing the sale of their oil; since re-entering the market they have been heavily against agreeing to an output curb. However, Iran’s oil minister praised the output agreement last night as an “exceptional decision”.
He remarked that “after two-and-a-half years, OPEC reached consensus to manage the market.”
The exact specifics of the deal remain to be seen, leading to speculation over how much each country will be required to cut. The next formal OPEC meeting is scheduled for November, where the details will be finalised. Decisions will then be made over whether the deal will be extended to non-OPEC nations, such as Russia.
29/09/2016