Oil Surges as OPEC Strikes Production Cut Deal

OPEC members managed to reach a deal to cut oil output, causing crude prices to jump more than 8% after months of struggling with declines due to market uncertainty regarding the capability of the group to reach an agreement.

The deal was made possible when Saudi Arabia and Iran, whose disputes blocked the deal which looked to end the oil glut persisting in the market, reached a compromise. Iran was allowed to raise its production, while Saudi Arabia conceded to take the lion's share of the cuts.

The oil producer cartel announced that it would reduce production by 1.2 million barrels per day from its current level of 33.6 million bpd beginning January 2017. It also expects producers who are non-OPEC members, including Russia, to join the cuts adding up to 600, 000 bpd.

The cuts were bigger than anticipated and equals around 1% of total global production. Oil prices soared and shares of oil companies surged more than 10% after the agreement was confirmed.

U.S. crude rose $4.21 or 9.3% and traded at $49.44 per barrel. Meanwhile, global benchmark Brent crude rose $4.09 or 8.8% and settled at $50.47.

News are provided by InstaForex