Oil nears $ 50 mark as OPEC OKs cuts

Will slash production by 1.8M barrels a day

Oil prices soared Wednesday after a group of the world’s largest oil producers reached a deal in Vienna to curb production for the first time in eight years.

The agreement among the Organization of the Petroleum Exporting Countries comes amid a glut of global oil supply that has suppressed energy prices and increased tensions between members Saudi Arabia, Iran and Iraq.

Member countries, seeking to bolster prices, agreed to slash production by 1.2 million barrels per day, OPEC Conference President and Qatar energy minister Mohammed Bin Saleh Al- Sada said.

Non- member countries had also agreed to cut 600,000 barrels per day — including previously reluctant Russia, which will shed 300,000 barrels — for a combined total of 1.8 million barrels a day.

“We came to the understanding that the market needs to be rebalanced,” Al- Sada said, calling the deal “courageous.”

U. S. benchmark crude soared 9.3% to settle at $ 49.44 per barrel after falling 3.9% Tuesday amid fears that the deal might not materialize. Brent crude, used to price international oil, posted similar gains.

The OPEC accord included more aggressive cuts than the market expected, raising the distinct possibility of prolonged gains for the beleaguered commodity.

It also included a pledge to use a monitoring committee and independent data to gauge output, reducing the chance that countries can self- report artificially low figures or get away with cheating.

“This is a much bigger cut than most people thought we’d get and could send the oil price up to between $ 56 to $ 60 per barrel,” Bob Minter, investment strategist at Aberdeen Asset Management, said in a note.

The plans take effect Jan. 1.