OPEC Reaches Deal on Oil, Futures Soar (XLE, UCO)

OPEC Reaches Deal on Oil, Futures Soar (XLE, UCO)

"For the moment, however, it is likely that outside countries are happy to enjoy the previously announced decline in OPEC, hoping that the course continue to rise", he qualified.

According to the statement, the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, led Nigeria's delegation at the meeting and the negotiation which led to Nigeria getting an exemption from the production cut.

OPEC's three largest producers - Saudi Arabia, Iraq and Iran - overcame disagreements to reach Wednesday's landmark deal in a bid to drain record global inventories and bolster the price of crude.

"(OPEC members) have an interest in maintaining and getting to a higher oil price.

Analysts are also doubtful over how the agreement will be enforced, as OPEC has no authority to make its members comply.

West Texas Intermediate was trading at $50.68 per barrel just after Thursday's opening bell, still off from a one-year high of $52.66 per barrel in late June. Within a year, the price had recovered to around $75 a barrel. Prices gained 5.5 percent in November. The January contract jumped $4.09, or 8.8 percent, to expire on Wednesday at $50.47 a barrel. The global benchmark traded at a US$1.54 premium to WTI.

The Organization of the Petroleum Exporting Countries agreed on Wednesday to its first oil output reduction since 2008 after de-facto leader Saudi Arabia accepted "a big hit" and dropped a demand that arch-rival Iran also slash output.

On the breakdown of the Opec output cut, Public Investment Bank said Saudi Arabia would lead the way in cutting nearly 500,000 bpd, followed by Iraq (210,000 bpd), United Arab Emirates (139,000 bpd) and Kuwait (131,000 bpd). Non-member Russian Federation, also pumping at a post-Soviet record, will cut by as much as 300,000 barrels a day "conditional on its technical abilities", Bloomberg reports citing Energy Minister Alexander Novak.

"Skepticism remains on individual countries' follow-through, which is keeping prices below year-to-date highs (of $53.73 per barrel in October) for now", Morgan Stanley analysts said. While the group plans to hold talks with non-0PEC producers next week in Doha, OPEC will meet again on May 25 next year, at which point it intends to extend the cuts by another six months. The deal is significantly more ambitious than the 700000 barrel per day reduction which was agreed to back in September.