SINGAPORE: Oil prices surged Thursday after the OPEC producers´ group surprised the market with a deal to slash output.
At the end of six hours of negotiations and weeks of horse trading, OPEC announced the plan to cut production to a level of 32.5-33 million barrels per day (bpd) from 33.47 billion, bpd in August, the International Energy Agency (IEA) said.
The informal meeting was held on the sidelines of an IEA meeting in a bid to stabilise prices that have been battered by a stubborn supply glut since 2014.
Oil prices soared by as much as six percent following the news and extended gains in Asian trade on Thursday although at a slower pace.
At around 0100 GMT, US benchmark West Texas Intermediate (WTI) for delivery in November was up 23 cents to $47.29 and Brent crude for November added 22 cents to $48.91 a barrel.
The decision to cut output caught the market offguard.
Market watchers had been pessimistic about a cut or a freeze after similar efforts fell apart in April due to disagreements between OPEC majors Saudi Arabia and Iran.
Angus Nicholson, a Melbourne-based analyst with IG Markets said the OPEC decision was the main impetus for the price surge but said details of the deal "sound a bit fuzzy at the moment".
"There is the possibility that OPEC managed to commit to a weak deal at this meeting that may pave the way for a more comprehensive production cut at the November meeting," he said in a note, referring to OPEC´s formal meeting on November 30.
"A more comprehensive deal from OPEC and Russia at the November meeting would easily clear the way for WTI oil to trade around US$55."
Nicholson also said official data showing a fall in the weekly US commercial crude inventories helped to boost the market.
The US Energy Information Administration said Wednesday that crude stocks in the world´s top oil consumer fell by 1.9 million barrels, confounding expectations for a rise of three million barrels.
A decline in crude stocks signals stronger consumption and is positive for oil prices.
"This has now been four straight weeks of back-to-back declines in crude oil inventories, which is also very supportive of the spot price," Nicholson said.