OPEC has finally agreed to a preliminary deal to cut oil production for the first time in eight years, that has sent oil prices soaring.
The announcement late last night came as a surprise as comments leading up to the informal meeting on the sidelines of the IEF forum in Algeria had dampened any hope of an agreement.
In late trading crude prices rose by almost 6 per cent to nearly US$49 a barrel after the news broke.
"OPEC made an exceptional decision today. We have decided to decrease production by around 700,000 bpd,” Iran’s oil minister, Bijan Zanganeh was quoted by Reuters as saying.
The only fly in the ointment is that the deal will not be finalised until the next official meeting of OPEC on 30 November in Vienna. At that meeting OPEC will agree to production levels for each member country and after reaching its group target, it will seek support from non-member oil producers.
The group is expected to cut production to 32.5 million barrels per day from the current production levels of around 33.24 million bpd.
Many analysts were caught off guard that OPEC was able to finally reach a compromise after years of wrangling but others wanted to see the finer details which will not be ironed out till November.