OPEC agrees to trim output

OPEC caught markets and analysts off guard late on Wednesday when it announced an agreement on a production cut that exempts Iran, sending oil prices surging.

After hours of negotiations on the sidelines of the International Energy Forum in Algiers, OPEC agreed to reduce output to between 32.5 million and 33 million bopd, down from the 33.47 million bopd recorded in August. As such, the cartel will cut production by 970,000 bopd at most, less than the market’s reactions initial reaction suggested.

Crude prices rose by 6% upon the announcement, OPEC’s first such move since 2008. WTI hit a high of USD 47.45 per barrel in late trading, while Brent was seen at USD 48.96. However, in the early hours of trading on Thursday, prices were down to USD 46.98 and USD 48.51 per barrel for WTI and Brent, respectively.

Analysts pointed to Saudi Arabia as having shifted its position on the matter, allowing Iran to continue to increase its production. According to Iraqi Minister of Oil Jabbar Al Luaibi, his delegation played an “effective role” in mediating between the OPEC rivals, which was aimed at “serving the interest of oil-producing countries, supporting the stability of the oil markets and achieving common goals,” a statement on the ministry website read.