Oil prices jump after OPEC’s crude production deal

London / AFP

Oil prices rose on Thursday, building on a surge triggered by OPEC’s output decision. World crude prices soared almost 10 percent on Wednesday after OPEC hammered out a deal to cut oil output for the first time in eight years. Prices were up nearly 3 percent in Thursday trading.
Joshua Mahony, market analyst at IG trading group, said that “whilst yesterday’s announcement was over and above expectations, there still remain a number of hurdles to curing the oversupply evident in the oil market”.
The OPEC exporters’ group, meeting in Vienna, said its 14 members had agreed on specific targets that will reduce production by 1.2 million barrels a day from next month, while key non-member Russia also committed to a reduction. The pact ended weeks of uncertainty and volatility on crude markets as the key players bickered over who would shoulder the biggest burden of the cuts. It lit also a fire under energy companies’ share prices.
“The words ‘OPEC’ and ‘exceed expectations’ have rarely, if ever, been used in the same sentence. However yesterday’s production deal seems to have done just that,” Oanda senior market analyst Jeffrey Halley wrote in a note to clients. “Cuts have been shared across all members, including the recalcitrant Iran and Iraq.” Adding to the buying sentiment was a better-than expected reading on Chinese factory output that provided fresh hope the world’s number two economy was stabilising after years of slowing growth.
In foreign exchange, the dollar rallied to its highest mark since February and close to 115 yen, before easing. Gold suffered a sell-off, falling to a near 10-month low at $1,162.11 an ounce, as investors walked away from safe-haven assets that are popular in times of uncertainty.