OPEC agrees to first oil production cuts in 8 years

This announcement, made early Wednesday morning, started the biggest one-day rally in almost a year and rocketed prices back over $51 per barrel.

OPEC agreed to reduce collective production to 32.5 million barrels per day, Iranian Oil Minister Bijan Namdar Zanganeh said in Vienna on Wednesday. The national average for gasoline on Wednesday stood at US$2.15 a gallon, according to the AAA auto club.

As was reported earlier Lukoil increased oil output including worldwide projects by 3.6% in 2015 to 100.7 mln tonnes.

West Texas Intermediate was trading at $50.68 per barrel just after Thursday’s opening bell, still off from a one-year high of $52.66 per barrel in late June.

Opec’s dominant member, Saudi Arabia, will absorb the biggest hit by cutting about 500,000 barrels a day.

The production cut bodes extremely well for Canadian oil names-more so than their American or European counterparts.

Higher prices, however, are likely to cause more US shale producers to increase production.

And in both of these scenarios, Canadian oil names will profit as the shortfall in USA oil demand will be quickly picked up by renewed Canadian supply. “Most likely, the results will be seen from the second quarter, especially considering that Russian Federation begins to cut something really from the second quarter”, he said.

“It is a good day for the oil markets, it is a good day for the industry and it should be a good day for the global economy”, Saudi Arabia’s energy minister Khalid Al Falih is reported to have said following the agreement.

“We had projects for the [output] increase by another 200,000 barrels [per day]”. Stockpiles fell by 884,000 barrels to 488.1 million barrels. “There are low-marginal wells which will be stopped during this agreement”, Fedun said when asked how Lukoil is going to contribute.

“This market defying cut will be the firstÂ in eight years, a critical move which has ensured Opec maintains some credibility”, he said in a statement yesterday. That’s down from the 33.6 million barrels a day the group pumped in October. “I think we are at a point where we have modestly been able to set a cap on a production but not excessively”, he told Bloomberg.

The cartel will lower its monthly output by 1.2 million barrels per day (bpd) to 32.5 million bpd from January 1, Qatar’s energy minister and president of the OPEC conference said.

Now OPEC will have to make a similar deal with non-OPEC members.

This will be the first time since 2008 that OPEC would be accomplishing such a feat which is expected to tackle the key challenge of low price of oil in the worldwide market which has affected the global economy with most OPEC member countries including Nigeria feeling the impact. “For instance, it is unclear to what extent the entire agreement is subject to concrete non-OPEC contribution, with another meeting possibly to follow on 9 December”.