OPEC Agrees to Cut Oil Production, Price Jumps

Stocks Go Boom

Today’s a big day for Wall Street and stocks hit record highs as traders are betting big after OPEC’s deal. Crude oil prices are also rocketing after OPEC’s agreement to cut oil production.

After several failed meetings, OPEC members managed to clinch a deal in order to curtail oil supply, baffling skeptics and marking a turning point in the quest for clearing a global oil glut.

Also, today’s deal confirmed OPEC’s credibility by bringing the first oil production cuts in almost a decade. Needless to say, the markets are flamboyant  and oil prices surged on OPEC production cut expectations. Also, shares in oil companies are rising as the world expects higher crude prices in the near future, helping oil companies and indexes worldwide to post solid gains.

According to a Bloomberg report citing 2 delegates who participated at a ministerial meeting in Vienna, OPEC will cut crude production by 1.2 million barrels a day, from the current 33.7 millions to 32.5 millions a day. However, since the decision is not public nor official just yet, the sources asked Bloomberg not to identify them by their names.

After today’s OPEC meeting, Benchmark Brent crude prices soared eight percent, reaching $50,07 a barrel in London.

Today’s agreement was reached after months of intense negotiations between OPEC’s three main producers: Iran, Iraq and Saudi Arabia. Organization of Petroleum Exporting Countries’s 3 biggest producers managed to resolve their differences finally and they’ll now share the burden of cuts for the greater good so to speak, or at least that’s the idea.

What’s really worth mentioning is Saudi Arabia’s decision to accept for Iran to raise crude production up to 3.9 million barrels/day, this being the main issue in previous failed negotiations. The agreement is supposedly including an additional cut in crude production by non OPEC members of about 600,000 barrels/day.

To quote the chief oil analyst at Energy Aspects LTD:

“This should be a wake-up call for skeptics who have argued the death of OPEC.The group wants to push inventories down.”

If everything goes as expected, today’s deal will help a lot countries like Libya, Russia and Venezuela, big oil producers with their finances in shambles due to the sharp drop in crude prices from the last 2 years and it will also restore people’s confidence in OPEC, a bloc that controls a huge 40% of the world’s oil supply.

US shale drillers will also benefit from OPEC’s production cut, as they were literally crippled by the 2 years price rout.

Russia, which is the biggest oil producer outside of OPEC said that it’s ready to participate provided OPEC agrees to negotiate country quotas on an individual basis, even considering the possibility of reducing its output.