Oil surges as Opec reaches output cut deal

Crude rebounded from a two-week low after some Opec delegates at the meeting of oil producers in Vienna on Wednesday said they reached an agreement to cut supply by 1.2 million barrels a day.

Oil rose the most in seven months after Opec ministers forged a deal to cut production, sending stocks of energy producers and currencies of commodity-exporting nations higher.

Crude rebounded from a two-week low after some delegates at the meeting of oil producers in Vienna on Wednesday said they reached an agreement to cut supply by 1.2 million barrels a day. Russia’s ruble and Mexico’s peso advanced as companies from Exxon Mobile to Royal Dutch Shell gained. Royal Bank of Scotland Group slipped to a three-week low after failing the Bank of England’s toughest-ever stress test. Treasuries fell and the dollar extended its gain as a report showed US companies boosted hiring in November faster than forecast.

OPEC reached a unanimous decision to reduce its production level and we expect an active participation from Non-OPEC countries as well

The agreement to cut production for the first time in eight years reverberated through financial markets, lifting prospects for countries whose finances have been ravaged by the oil crisis. The market earlier this week had assigned odds of just 30 per cent that producers would overcome differences, according to Goldman Sachs. The agreement is likely to include an additional reduction of about 600,000 barrels a day by non-Opec countries.

“If a larger cut is announced and non-Opec countries contribute then we will see the price jumping above US$55 a barrel,” said Giovanni Staunovo, commodity analyst at UBS Group AG in Zurich.

* Bloomberg

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