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After nearly a year of speculation and “will-they-won’t-they” trepidation among global energy investors, the Organization of the Petroleum Exporting Countries (OPEC) on Wednesday agreed for the first time in eight years to cut output to stabilize global oil markets.
Oil markets have for the past two weeks rollercoastered as a deal first looked close, then elusive.
OPEC President Mohammed Bin Saleh Al-Sada said they will be cutting 1.2 million barrels a day starting January, bringing total output down to 32.5 million barrels a day.
The landmark deal came amid speculation that the cartel members would continue to quarrel over the size of the reduction.
Brent crude jumped over 9 per cent to more than $50 a barrel on the news with US benchmark West Texas Intermediate close behind.
Saudi Arabia accepted “a big hit” to its production and will be reducing output by almost 0.5 million barrels per day. Other Gulf OPEC allies will cut by a total of 0.3 million barrels per day.
“I think it is a good day for the oil markets, it is a good day for the industry and … it should be a good day for the global economy. I think it will be a boost to global economic growth,” Saudi Energy Minister Khalid al-Falih told reporters after the decision.
Non-OPEC Russia also agreed to trim its output for the first time in over a decade.
“Russia will gradually cut output in the first half of 2017 by up to 300,000 barrels per day, on a tight schedule as technical capabilities allow,” Russian Energy Minister Alexander Novak said at a briefing in Moscow.
Oil prices, in the meantime, are likely to rise and fall before surging next week as markets adjust to the deal.
In June, the United Arab Emirates Oil Minister Suhail Al Mazroui told reporters that he expected oil prices to reach $60 a barrel by m7d-2017.
The BRICS Post with inputs from Agencies