Oil on Friday surged by as much as 5.8 percent in London as OPEC reportedly agreed on a larger-than-expected deal with its allies to reduce output.
The producer alliance is to collectively curb production by 1.2 million barrels per day, delegates said after concluding a second day of meetings in Vienna.
That was more than cuts of 1 million barrels per day that had been discussed earlier.
Russia also agreed to join, one delegate said.
The breakthrough occurred after OPEC failed to reach an agreement during meetings on Thursday and after uncertainty on Friday morning over agreeing to a deal at all.
“Finally they got one, nobody really believed it after the morning hours,” Commerzbank AG analyst Carsten Fritsch said by telephone. “It’s mainly due to the lowered expectations before the deal.”
Oil had earlier this month plunged by more than 30 percent from a four-year high in October, as concern over excess supply was fueled by US sanctions waivers given for some buyers of Iranian oil, as well as growing US crude inventories and production.
Friday morning saw meetings between Russia’s energy minister and his Iranian and Saudi counterparts, as producers sought to hammer out a deal to reduce output.
Brent for February settlement added as much as US$3.48 to US$63.54 per barrel on London’s ICE Futures Europe exchange, after falling 2.4 percent on Thursday. It traded at US$63.23 per barrel by 9:52am in New York.
West Texas Intermediate for delivery next month gained US$2.36 to US$53.85 per barrel on the New York Mercantile Exchange. The US benchmark traded at a US$9.13 discount to Brent.
Total West Texas Intermediate volumes traded were about twice the 100-day average.
OPEC concluded its meeting with an accord to remove 1.2 million barrels per day of oil supply from the market, with its allies, including Russia, taking a 400,000 barrel per day share, delegates said, asking not to be named because the information was not public.
Iran, which has sharply reduced oil shipments amid US sanctions, was granted an exemption from curbing its output, Iranian Minister of Petroleum Bijan Namdar Zanganeh said.
After a meeting on Thursday, Saudi Arabian Minister of Energy, Industry and Mineral Resources Khalid al-Falih had talked down the potential for a deal, saying that he was not confident one could be reached.
“This cut size is a positive surprise versus yesterday,” UBS Group AG commodities analyst Giovanni Staunovo said. “It will be interesting to see if there’s a meeting when they review in April and how that will work, but for now, this is bullish.”
In other energy trading, wholesale gasoline climbed 3.7 percent to US$1.49 per gallon, heating oil rose 1.5 percent to US$1.89 per gallon and natural gas gained 3.7 percent to US$4.49 per 1,000 cubic feet.
Gold gained 0.7 percent to US$1,252.60 per ounce, silver climbed 1.3 percent to US$14.70 per ounce and copper added 0.6 percent to US$2.76 per pound.
Additional reporting by AP
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