Brent crude futures jumped 8% this morning to more than $50 a barrel after the Organization of the Petroleum Exporting Countries agreed to cut oil production for the first time since 2008, Reuters reports.
A source tells Reuters OPEC members have agreed to a proposal by member Algeria to reduce production by around 4.5%, or about 1.2 million barrels per day. The source tells Reuters that Saudi Arabia is accepting “a big hit” on its production and is agreeing to arch-rival Iran freezing output at pre-sanctions levels. Saudi Arabia would contribute around 0.5 million barrels per day by reducing output to roughly 10 million barrels per day.
Iran, meanwhile, would freeze output at close to current levels of roughly 3.8 million barrels per day, and other members would also cut production.
The source adds that OPEC had also suspended Indonesia from OPEC and hence the exact combined reduction was yet to be calculated. The meeting was still ongoing after around six hours of debate.
“OPEC has proved to the skeptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut,” says OPEC watcher Amrita Sen from Energy Aspects.
