Markets surge on OPEC cut

Oil prices have jumped by over a dollar after OPEC unexpectedly announced a 900,000-barrel cut to production ceilings at its meeting in Vienna.
Markets surge on OPEC cut Markets surge on OPEC cut Markets surge on OPEC cut Markets surge on OPEC cut Markets surge on OPEC cut

Fluctuations in oil prices had eased during the week as the world markets waited for the outcome of the cartel's Vienna meeting, although it was widely expected to leave the existing production quotas in place.

US light crude futures were down to $US27.13 a barrel, while in London benchmark crude futures had reached $US25.52 a barrel.

Member states apparently agreed to make a pre-emptive cut in their production target for crude in order to bolster prices ahead of an expected decrease in demand early next year.

New York's reference light sweet crude November contract jumped $US1.11 a barrel to $US28.24 and Brent North Sea crude oil for November delivery shot up $US1.16 a barrel to $US26.68.

The 900,000-barrel per day cut, or 3.5% of production, is down from the current level of 25.4 million barrels per day.

Recent prices had been in a downward trend, resulting in a 15% slide since August, mainly due to a seasonal downturn in petrol consumption (the end of the US driving season).

OPEC members will gather again on the fourth of December and several ministers have warned of more cuts ahead of an expected excess supply as Iraqi production gathers momentum and non-OPEC states such as Norway, Russia and Mexico increase their output.

Iraq has not been part of OPEC's quota system since UN sanctions were imposed on Baghdad following its 1990 invasion of Kuwait.

Iraq has the world's second-largest proven reserves of crude oil but is struggling to rehabilitate its oil facilities, which are suffering from years of neglect and from postwar looting and sabotage.

However OPEC's fragile control over its member states appears to be slipping with Iranian oil minister Bijan Zanganeh announcing earlier this month that his country's oil production had increased to 4.2mmbopd, half a million barrels over its OPEC imposed quota of 3.7mmbopd, and that most likely it would not stop there.

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