VIENNA—OPEC representatives reached a landmark deal to reduce oil output, propelling crude prices more than 8% after months of wrangling and market uncertainty about the ability of the once-mighty group to strike an agreement.
The Organization of the Petroleum Exporting Countries said Wednesday that it would cut production by 1.2 million barrels a day from 33.6 million barrels and said it expects producers from outside the group, including Russia, to join with additional cuts totaling 600,000 barrels a day.
The OPEC cuts were deeper than many analysts had expected, amounting to about 1% of global production. The 14-member group hopes the output cuts will help shrink a supply glut that has been fed in part by the U.S. shale boom, and has depressed oil prices for more than two years.
At the same time, the pact benefits the shale producers, giving them an incentive to ramp up production—a move that could potentially bring a halt to any oil-market rally.
Oil prices surged and shares of more than 50 U.S. exploration-and-production companies climbed more than 10% following the agreement.
Crude for January delivery climbed $4.21, or 9.3%, to settle at $49.44 a barrel, on the New York Mercantile Exchange. Brent crude, the global benchmark, gained $4.09, or 8.8%, to $50.47, on ICE Futures Europe. Both finished at a one-month high.
The biggest gainers in energy stocks were generally those operating in regions that have been uneconomical to drill for much of the past two years. The S&P 500’s energy sector advanced 4.8%.
Still, questions remain about the long-term impact of the deal and the ability of the group to enforce the cuts. The group has a checkered history of complying with its own agreements, with countries often producing more than their agreed-upon share. Analysts said oil traders would watch the agreement warily in the coming weeks.