Oil prices soared after OPEC, a group of the world’s largest oil producers reached a deal in Vienna, Austria, to curb production for the first time in eight years.
The agreement among the Organization of the Petroleum Exporting Countries comes amid a glut of global oil supply that has suppressed energy prices and increased tensions between members Saudi Arabia, Iran and Iraq.
Member countries, seeking to bolster prices, agreed to slash production by 1.2 million barrels per day.
The Organization of the Petroleum Exporting Countries had agreed a deal in line with an accord the group reached in Algiers in September.
OPEC member Algeria was proposing to set a new production ceiling at 32.5 million barrels per day, down from current levels of 33.6 million.
The 14-country OPEC, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output to prop up oil prices, which have halved since mid-2014.
OPEC would exempt Iran, Libya and Nigeria from cuts as their output has been crimped by unrest and sanctions.
OPEC said that non-member countries had also agreed to cut 600,000 barrels per day, including previously reluctant Russia, which will shed 300,000 barrels.
The OPEC accord included more aggressive cuts than the market expected, raising the distinct possibility of prolonged gains for the beleaguered commodity.
It also included a pledge to use a monitoring committee and independent data to gauge output, reducing the chance that countries can self-report artificially low figures or get away with cheating.
The plans take effect Jan. 1 and last for six months, with the possibility of another six-month extension. Saudi Arabia, the largest producer in the cartel, whose participation was crucial to the outcome, agreed to slash 486,000 barrels a day, or about 40% of the total. The next highest were Iraq at 210,000 and United Arab Emirates at 139,000
The output reduction would slash OPEC daily production to about 32.5 million barrels.
Background:
In June 2014, oil traded at over $100 a barrel. But the price went into a free fall later that year after OPEC failed to reach a deal on cuts.
Prices briefly plunged below $30 per barrel in early 2016, sending dozens of American energy companies into bankruptcy and causing hundreds of thousands of layoffs worldwide.
The cartel last slashed production in 2008 as oil demand and prices slumped during the global financial crisis.