Oil prices soar as Opec, Russia agree to cut output

NEW YORK: Oil prices rose more than 8% yesterday as some of the world’s largest oil producers agreed to curb oil output for the first time since 2008 in a last-ditch bid to support prices.

The Organisation of Petroleum Exporting Countries (Opec) agreed to cut production to 32.5 million barrels per day (bpd), Kuwait’s oil minister said. The cuts include Iraq reducing output by 200,000 bpd to 4.351 million bpd starting in January.

Kuwait, Venezuela and Algeria have agreed to monitor compliance with the Opec agreement.

Non-Opec member Russia has agreed to cut output by 300,000 bpd. Opec will meet with non-Opec producers on Dec. 9.

US West Texas Intermediate (WTI) crude futures rose US$4.02 to US$49.25 a barrel, a 8.9% gain, by 1624 GMT. WTI briefly traded at a high of US$49.37 a barrel, a 9% gain.

Brent crude futures rose US$3.79 to US$50.17 a barrel, a 8.2% jump.

A new wild card was the suspension of Indonesia from Opec on Tuesday, sources said. The organisation has agreed to distribute Indonesia’s oil output share among certain Opec countries. Indonesia produced about 730,000 bpd in October, according to an Opec survey from Reuters.

“I think the market is in a wait and see mode,” said John Kilduff, a partner at Again Capital in New York.

“We’re going to have to see these cuts truly get implemented. The production trend has been higher,” he said.

“Opec has proved to the sceptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut,” said Opec watcher Amrita Sen from Energy Aspects. – Reuters