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Oil rallies after Opec ministers announce output cut Oil rallies after Opec ministers announce output cut
(about 3 hours later)
The price of oil has surged after ministers from the world's biggest oil nations announce a deal to cut output for the first time in eight years. The oil producers cartel Opec has agreed a preliminary deal to cut production for the first time in eight years, sending crude prices surging.
Members of the oil producers Opec cartel agreed to the modest cuts to ease fears of a glut, reports said. The major oil exporting nations struck the deal at talks in Algeria on Wednesday to ease fears of oversupply.
"Opec made an exceptional decision today," Iran's Oil Minister Bijan Zanganeh said after talks in Algeria. "Opec made an exceptional decision today," Iran's Oil Minister Bijan Zanganeh said.
Brent crude, the international benchmark for oil, rose almost 6% to nearly $49 a barrel on the news.Brent crude, the international benchmark for oil, rose almost 6% to nearly $49 a barrel on the news.
Full details of the agreement will not be released until after a formal Opec meeting in November. Oil ministers said full details of the agreement would be finalised at a formal Opec meeting in November.
Output will fall by about 700,000 barrels a day, although the cuts will not be distributed evenly across the cartel, with Iran being allowed to increase production.
Disagreements between Iran and its regional rival Saudi Arabia had thwarted earlier attempts to reach a deal.
'Without reservations'
Many of Opec's smaller members pushed for the cut after seeing oil prices plunge from $110 a barrel over the past two years due to oversupply and slowing demand.
Nigerian Oil Minister Emmanuel Ibe Kachikwu said it was a "very positive deal", while Algerian Energy Minister Noureddine Bouarfaa said: "The decision was unanimous, and without reservations."
The outline deal will limit output from Opec countries to between 32.5 million and 33 million barrels a day, said Mohammed Bin Saleh Al-Sada, Qatar's energy minister and current president of Opec.
Current output is estimated at 33.2 million barrels per day, although Iraq questioned on Wednesday how Opec measures the oil production of its members.
'Sceptical''Sceptical'
Many of Opec's smaller members were pushing for a deal after seeing oil prices plunge from $110 a barrel in the last two years due to oversupply and slowing demand. Some oil traders remain sceptical about the deal, saying they want to see the full terms, including the cuts agreed by individual members states, before passing judgement.
Iran and Nigeria's oil ministers put the cut at between 500,000 and 700,000 barrels a day. Jeff Quigley, director of energy markets at Stratas Advisors, said it was "too preliminary" to get excited.
However, some oil traders remain sceptical, saying they want to see the full terms of the deal, including the cuts agreed by individual members states, before passing judgement. "The devil's in the details here," Mr Quigley said. "And for them to say it's going to start in November is very suspect to me. We don't know yet who's going to produce what."