Oil prices surge after OPEC agrees surprise cut in production
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The Organization of Petroleum Exporting Countries (OPEC) agreed Wednesday to cut oil production, ministers said, in a surprise move aimed at boosting persistently weak crude prices.
The news triggered an immediate spike of more than 5 percent in crude prices, as markets had expected the Algiers meeting to end without agreement.
In London benchmark Brent North Sea crude for November delivery rose $2.72 to $48.69, while in New York a barrel of West Texas Intermediate (WTI) was up $2.38 to $47.05.
OPEC members, whose countries produce 40 percent of the world's crude oil, had agreed to cut their output by 750,000 barrels a day to 32.5 million barrels per day (bpd), according to Bloomberg News, while ministers gave a slightly more nuanced figure.
"We have an agreement between 32.5 to 33 million bpd," Nigerian oil minister Emmanuel Ibe Kachikwu said shortly afterwards. His Qatari counterpart confirmed the figure.
"The meeting was conducted under a very positive atmosphere reflecting strong coherence of OPEC," said Qatari energy minister Mohammed bin Saleh al-Sada.
The informal OPEC meeting opened earlier Wednesday to discuss a possible freeze in output by the cartel, with the aim of raising prices which have fallen by more than half since mid-2014.
The surprise output move came after Algerian Energy Minister Noureddine Boutarfa pressed demands for action on an oil supply glut and higher investment to stabilise the market.
"We must act on supply to re-stabilise the market" which has been hit by a massive surplus that has dragged prices down to record lows in the past two years, Boutarfa told a news conference.
According to the International Energy Agency, last year saw a 25 percent fall in investment in oil and gas exploration and production and the agency says the decline is continuing apace.
Amid record output, there is discord among the 14-nation cartel whose share of global crude supply is around 40 percent.
Progress is hampered notably by disagreements between Saudi Arabia and Iran, the latter back on stream as a producer after the recent lifting of a range of energy-related sanctions.
OPEC kingpin Saudi Arabia has so far refused to curb its output at a time when Iran is ramping up production following the lifting of nuclear-related sanctions.
Iranian Oil Minister Bijan Zanganeh said Tuesday on the eve of the Algiers meeting that the Islamic republic was not yet ready to join a mooted production freeze.
Zanganeh said Iran wanted to increase its daily output to pre-sanctions levels of four million barrels, from the current estimated level of up to 3.8 million.
Saudi Arabia and Iran, the Middle East's foremost Shiite and Sunni Muslim powers, are at odds over an array of issues including the wars in Syria and Yemen.
But there were some tentative signs of a narrowing of differences in Algiers, where major non-OPEC producer Russia also joined the talks on Wednesday.
Saudi Oil Minister Khaled al-Faleh said Tuesday he was optimistic that ministers would find some common ground.
A previous bid to freeze output fell apart in Doha in April as Iran refused to take part, saying it needed to return output to pre-sanctions levels.
Further complicating the negotiations, Libya and Nigeria have also been reluctant to limit production after conflicts that have curbed their output.
Prices plunged from peaks of more than $100 a barrel in mid-2014 to near 13-year lows below $30 in January, before recovering some of the losses.