Crude oil prices rose by more than 4% on Thursday, one day after OPEC stunned skeptics and reached an agreement to cut production for at least six months.
Global benchmark Brent crude for February was gaining by 4.4% to $54.13 a barrel midday Thursday, marking the highest level in more than a year. Meanwhile, West Texas Intermediate crude was up 4.1%, trading at around $51.49. WTI surged by as much as 9% on Wednesday following confirmation of the OPEC deal.
OPEC member nations agreed to curb production by 1.2 million barrels a day to bring the ceiling to 32.5 million barrels a day, effective Jan. 1, 2017. The deal marks the first limit on output in eight years as the cartel looks to rebalance the oil market and boost prices.
"With a greater than 1 million barrel-a-day cut, our commodities team sees oil prices moving above $50 a barrel in the near term, and potentially as high as $59 a barrel in 2017 with firm quotas and a tight control mechanism," Bank of America Merrill Lynch analysts said in a note Wednesday.
OPEC's leading producer, Saudi Arabia, is making the biggest production cut of 486,000 barrels a day. No. 2 producer, Iraq, also agreed to curb production, a surprise to many after the country pushed to be exempt in order to use oil revenue to fight ISIS militants. Iran, meanwhile, will be allowed to boost production slightly from its October levels.
In addition to the organization's 1.2 million barrel-a-day cut, the deal is subject to another 600,000 barrel-a-day output reduction by non-OPEC members. Russia already has agreed to cut production by 300,000 barrels a day, OPEC President Mohammed Bin Saleh Al-Sada said during a press conference at the 171st Meeting of the Conference of the Organization of Petroleum Exporting Countries.