OPEC announced a plan to cut oil supply on Thursday, sending European stocks and futures higher as oil prices surged.
OPEC agrees on oil production cut
OPEC said on Thursday they may have reached an agreement to to curb oversupply in the oil market, after months of wrangling between OPEC members. The oil cartel are aiming to cut production to between 32.5 and 33 million barrels a day, according to CNBC, and expect to finalise the plan at the official OPEC meeting in Vienna, on the 30th of November.
News of the agreement on a production cut came as a surprise to many, with past discussion over production freezes to curb the long standing oversupply problem yielding no positive outcomes. Attempts were blocked by Saudi Arabia and Iran, who were unwilling to commit to the measure. There has not been an agreement on a production freeze since 2008.
However oversupply has been a real problem for over two years, with market forces unable to counteract it. At the start of this month, Saudi Arabia and Russia announced that they would be working together to find a solution to the oversupply. The two countries also stated that they will be encouraging OPEC countries to participate. While the countries’ representatives mentioned a production freeze as a possible solution, disagreement between the Russian and the Saudi Arabian officials were obvious and did not instill confidence that a cut would be agreed.
Oil shares jumped on the news, leading European stocks and futures to rise
Royal Dutch Shell (LON:RDSA), BHP Billiton (LON:BLT) and BP (LON:BP) are the highest performers in the FTSE 100 today, rising 5.3 percent, 4.42 percent and 4 percent respectively, helping the FTSE 100 gain 0.99 percent on the day.
The German DAX is headed by energy companies RWE and E.ON with rises of 4.15% and 1.97% respectively. The DAX is up 0.45% on their strong performance.
Oil prices retracting again after a strong day on Wednesday
Oil prices jumped after the decision yesterday, gaining two dollars over the day. However, today oil prices are down again slightly. WTI Crude Oil fell 0.21%, to $46.95 per barrel. Brent Crude slipped 0.69%, to $48.36 per barrel.