The price of British Brent crude oil jumped 8.4% to $51.3 a barrel – although this is still less than half the June 2014 thirteen-year high of $100-barrel.
However, oil analysts warned that crude prices may retreat from today’s gains unless the agreed cuts in output are firmly implemented by individual OPEC members from next month.
Meeting in Vienna, energy ministers from the Organisation of the Petroleum Exporting Countries (OPEC) agreed to cut production to 32.5 million barrels per day.
The cut – at the low end of a preliminary output agreement struck in Algiers in September – reduces OPEC production from a current 33.64 million bpd.
The cuts include Iraq reducing output by 200,000 bpd to 4.351 million bpd beginning in January.
Non-OPEC member Russia has agreed to cut output by 300,000 bpd. OPEC will meet with non-OPEC producers on 9 December.
OPEC president Mohammed Bin Saleh Al-Sada, said a cut of 1.2 million barrels a day would start from January 2017.
That is about 3% of the group’s output and would bring total production to 32.5 million barrels per day.
Oil analyst Spencer Welch, Director of IHS Energy, commented: “We expected a deal to happen today as OPEC was under pressure to deliver following their public announcements in September.
“The burden of the cut appears likely to once again fall on Saudi Arabia, UAE and Kuwait.
“This deal will certainly provide some short term market price boost.
“But, disagreements persist among OPEC members on how to measure production, so the deal will be hard to police.
“One thing is certain – US tight oil (shale) will like the price rise and production will start rising soon. But, this was going to happen regardless of any OPEC deal”.