OPEC members have agreed to a preliminary deal to cut output for the first time in eight years which has resulted in increased oil prices.
The Organisation of the Petroleum Exporting Countries (OPEC) which is made up of 14 major oil producing nations agreed to cut its output yesterday, following a three-day meeting in Algiers. Oil Ministers involved in the meeting stated that the full details regarding the deal are yet to be finalised and would be agreed at a formal meeting in November.
The news has helped to ease global oversupply worries and has led to a strong increase in the price of oil. The international benchmark for oil, Brent Crude rose by nearly 6% to just below $49/b following the announcement.
Production levels will decrease by as much as 700,000 barrels per day, although the cuts will not be evenly distributed amongst the 14 countries and Iranian output will be allowed to rise. Previous attempts to reach a deal fell through due to disagreements between Iran and Saudi Arabia.
The call for production cuts was led by OPEC's smaller members who were impacted by the significant drop in oil prices which saw Brent plummet over the last two years from $110/b to as low as $27.1/b.
Nigerian Oil Minister, Emmanuel Ibe Kachikwu said it was a "very positive deal", while Algerian Energy Minister, Noureddine Bouarfaa added: "The decision was unanimous, and without reservations."
The initial outline of the deal will see production limited to between 32.5 million - 33 million barrels a day, from current levels of 33.2 million barrels according to Qatar's energy minister, Mohammed Bin Saleh Al-Sada.
The changes on the oil market have also transferred to gas and power prices, resulting in strong upward movement, causing most suppliers to withdraw supply contracts until further notice. If you would like to learn more about how gas and energy contracts have been affected then feel free to get in touch with Apollo by calling us on 01257 239500 or by filling out the call back form on our contact page.