VIENNA (BLOOMBERG) - Oil held its biggest gain in nine months and crude producers rallied after Opec approved the first supply cuts in eight years, with focus now shifting to how strictly it will implement its bid to ease a record glut.
Futures added 0.1 per cent in New York after surging 9.3 per cent Wednesday, the largest gain since February amid record volumes. Opec agreed to reduce collective production to 32.5 million barrels a day, Iranian Oil Minister Bijan Namdar Zanganeh said in Vienna Wednesday. Goldman Sachs Group said the pact means oil could rise to US$55 (S$78.4) a barrel in the first half of next year.
Oil has whipsawed since a production-cut was first proposed in Algiers in September and investors speculated about whether an accord could be struck. The deal, designed to drain record global oil inventories, overcame disagreements between the group's three largest producers - Saudi Arabia, Iran and Iraq - and ended a flirtation with free markets that started in 2014. Bernstein said prices may rise to US$55 to US$60 a barrel in the short-term as a result of the historic accord.
"The market will no longer see a sudden plunge in oil prices," Seo Sang-young, a market strategist at Kiwoom Securities, said by phone from Seoul. "The biggest winners from the agreement are US shale producers, who will expand production as prices rally."
West Texas Intermediate for January delivery was at US$49.48 a barrel, up 4 US cents, on the New York Mercantile Exchange at 11:27 a.m. in Seoul. The contract jumped US$4.21 to close at US$49.44 a barrel on Wednesday as aggregate trading volume on Nymex rose to a record 2.4 million contracts, according to updated CME data compiled by Bloomberg. Prices gained 5.5 percent in November.
Brent for February settlement was at US$51.91 a barrel on the London-based ICE Futures Europe exchange, up 7 US cents. The January contract surged US$4.09, or 8.8 percent, to expire on Wednesday at US$50.47 a barrel. The global benchmark traded at a US$1.50 premium to WTI.
Saudi Arabia, which raised oil production to a record this year, will reduce output by 486,000 barrels a day to 10.058 million a day, an OPEC document shows. Iraq, the group's second-largest producer, agreed to cut by 210,000 barrels a day from October levels. The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State.