Oil Prices soared on Wednesday as OPEC reached an agreement to cut oil production for the first time since 2008. The Organization of the Petroleum Exporting Countries has agreed to cut output by 1.2 million barrels a day to 32.5 million a day, according to people familiar with the matter. This is the first OPEC output limiting deal in eight years. The meeting is still continuing in Vienna and the details are not public yet.
Global crude benchmark Brent for January deliveries jumped 7.81 percent to $50 a barrel by 11:18 a.m. the biggest one-day move in nine months. U.S. West Texas Intermediate future also surge 7.19 percent to 48.48 a barrel.
"The extent of the (price) move shows no one wants to miss the boat. There must be a general consensus that there will be a cut, whether it's going to be bullish, I don't know, but it's the domino effect," PVM Oil Associates analyst Tamas Varga said.
Oil price rebounded from a nearly 4 percent drop on Tuesday as report said Iran didn’t prepare to reduce oil output. According to people familiar with the matter, Saudi Arabia will make Iran an exception and allow it to raise output to about 3.9 million barrels a day. While Saudi Arabia will cut its own output to 10.06 million barrels per day.
According to the International Energy Agency, OPEC production was 33.8 million barrels a day in October. In September, OPEC set reach an output cap at around 32.5-33 million barrels per day in Algiers.
“The markets are getting closer to rebalancing. It’s just that if they did agree to cut production, it would get the market through the first half of next year with significantly less of an oversupply,” said Ann-Louise Hittle, a senior oil market expert at Wood Mackenzie, a consulting firm.