The Organization of Petroleum Exporting Countries (OPEC) agreed to cut production for the first time in eight years and the market welcomed the decision with expressive black gold rises.
The organization reported it will cut production by 1.2 million barrels a day (mbd), after negotiations that caused high price volatility.
Markets welcomed the decision with gains of almost 10% after nearly two years in which oversupply knocked down the value of oil.
In New York, a barrel of “light sweet crude” (WTI), a benchmark for US crude, gained $ 4.21 (9.31%) reaching $ 49.44. And in London, a barrel of Brent rose 8.82% to increase 4.09 to reach 50.47 dollars.
The agreement is an effort of all OPEC members, except Iran, Libya and Nigeria, who can maintain their current level and in some cases even increase it.
We are excited, we believe this was the agreement we were looking for,”
said the Saudi energy minister .Khaled Al Falih, who said it is the first time in the history of OPEC that it includes non-member countries in a pact.
Several countries outside OPEC will work together to achieve that goal,”
said the minister.
This is the case of Russia, which confirmed a cut of 300,000 barrels per day in a global effort to raise prices.
According to OPEC, the biggest cuts are in Saudi Arabia (-486,000 bd), Iraq (-210,000), the United Arab Emirates (-139,000) and Kuwait (-131,000).
Although many members described the agreement as “historic”, analysts have doubts about its scope and especially on its implementation difficulties.
It is clear that today’s agreement will lead to higher prices in the short- term market. But there is disagreement among OPEC members on how to measure production so the deal will be difficult to monitor,”
said Spencer Welch, director of IHS Energy.