Opec has agreed to cut supplies for the first time since the global financial crisis eight years ago, sending prices soaring above $50 a barrel as Saudi Arabia and its Gulf allies accepted big reductions in production.
The cartel, which pumps a third of the world’s oil, reached the deal to cut 1.2m barrels a day to about 32.5m b/d for six months from the start of January after six hours of talks in Vienna. There is an option to extend the agreement until the end of 2017.
The agreement represents a major reversal in policy for Saudi Arabia, which two years ago tried to undermine US shale and other high-cost producers by raising its output in face of fast-growing supplies outside the group after four years of $100 oil. That led to a crash in prices that shook the industry and roiled oil-reliant economies. The shares of shale producers climbed in New York on the news.