OPEC Agrees To First Output Cut In 8 Years, Price Jumps 8%

The Organization of Petroleum Exporting Countries (OPEC) has agreed to the very first oil output cut in eight years.

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The oil cartel, which is currently meeting in Vienna, Austria, has not officially confirmed the deal, but news agencies on ground, and delegates who are party to the deal, say an agreement is already in place.

According to Reuters, Saudi Arabia, the biggest OPEC producer, agreed to take a big hit, to accommodate Iraq’s reluctance, while Iran has agreed to a cut.

Bloomberg is also reporting that the cartel agreed to cut production by 1.2 million barrels per day, with hopes that oil will trade above US$50 a barrel for the days ahead.

Speaking at the opening of the 171st ordinary meeting, Mohammed Bin Saleh Al-Sada, OPEC conference president, expressed optimism that the deal would become a reality, considering work done since the Algiers accord was consummated.

“As the history of OPEC has shown and as many of our predecessors will no doubt acknowledge, the road to success is not always easy to navigate,” Al-Sada said.

“However, as we have shown over the past few months, with hard work, drive and commitment from all of us, we can overcome challenges and obstacles through cooperation and compromise.

“I feel we have already taken great steps to shape a fair and common understanding among us all.  And I have the sense that everyone here remains committed to ensuring we find the solutions needed to implement the ‘Algiers Accord’.

“We all have a common goal of developing a lasting solution that brings forward the rebalancing process, reduces the length of the downturn, lessens volatility and stabilizes the market.”

OPEC is expected to address a press conference by 4pm Nigerian time.

Oil Markets Jittery Ahead Of OPEC Meeting Later In Day

Reuters report that Oil markets were jittery on Wednesday ahead of an OPEC meeting later in the day, with members of the producer cartel trying to thrash out an output cut to curb oversupply that has seen prices more than halve since 2014.

U.S. West Texas Intermediate (WTI) crude futures were at $45.38 a barrel at 0019 GMT, up 35 percent from their last settlement.

International Brent crude futures were yet to trade.

Traders said that the market was extremely nervous, and that prices could swing either way quickly depending on developments at the Organization of the Petroleum Exporting Countries meeting in Vienna.

Oil dropped nearly 4 percent the previous session over disputes between Saudi Arabia, Iran and Iraq regarding details of the planned output cut.

"At the moment, a deal to limit oil production looks bleak and oil prices are reflecting that view. But OPEC is known for leaving things to the last minute," said Fawad Razaqzada, analyst at brokerage Forex.com.

"Expect to see lots of noise, then a big price move in oil prices tomorrow, because ultimately one camp will be proven wrong. Will it be the buyers or the sellers?"

Razaqzada said that should OPEC come to an agreement, then oil prices would likely rise above US$50 per barrel, and if the group failed to agree anything, prices would fall towards, though unlikely below, US$40 per barrel.

Iran and Iraq are resisting pressure from Saudi Arabia to curtail oil production, making it hard for the group to reach a deal to limit output.

On Tuesday, tensions rose after Iran wrote to OPEC saying it wanted Saudi Arabia to cut production by as much as 1 million barrels per day (bpd), much more than Riyadh is willing to offer, OPEC sources who saw the letter told Reuters.

Iranian Oil Minister Bijan Zanganeh told reporters upon arrival at OPEC's headquarters in Vienna that his country was not prepared to reduce output: "We will leave the level of production (where) we decided in Algeria."

OPEC, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output around 32.5-33 million bpd versus the current 33.64 million bpd to prop up prices.

At the time, OPEC said it would exempt Iran, Libya and Nigeria from cuts as their output had been crimped by unrest and sanctions.