OPEC agreed to a preliminary deal that will cut production for the first time in eight years, according to delegates briefed on the matter. Oil prices gained more than 6 percent as Saudi Arabia and Iran wrong-footed traders who expected a continuation of the pump-at-will policy the group adopted in 2014.
In two days of round-the-clock talks in Algiers, the group agreed to drop production to as low as 32.5 million barrels a day, two delegates said, asking not to be named because the decision isn’t yet public. One of the delegates said that OPEC needs to fine tune the deal in November, with a target-range of 32.5 to 33 million barrels per day.
The lower end of the production target equates to a nearly 750,000 barrels-a-day drop from what OPEC said it pumped in August. The group will set up a committee to decide over the next two months the individual supply cuts for its members.
The deal will reverberate beyond the Organization of Petroleum Exporting Countries. It will brighten the prospects for the energy industry, from giants like Exxon Mobil Corp. to small U.S. shale firms, and boost the economies of oil-rich countries such as Russia and Saudi Arabia. For consumers, however, it will mean higher prices at the pump.
Brent crude surged as much as 6.5 percent to $48.96 a barrel in London. The shares of Exxon Mobil, the world’s largest publicly listed oil company, climbed 4.2 percent, the biggest one-day increase since February.