Oil prices surge after Opec strikes deal to cut output
The Organisation of the Petroleum Exporting Countries has agreed its first oil output cuts since 2008, according to a source.
Saudi Energy Minister Khalid al-Falih said the Organisation of the Petroleum Exporting Countries (Opec) was close to clinching a deal to limit oil output, adding Riyadh was prepared to accept "a big hit" on its own production and agree to arch-rival Iran freezing output at pre-sanctions levels.
The comments could be seen as a compromise by Riyadh, which in recent weeks insisted that Iran fully participate in any cut.
Brent crude futures jumped by 7pc, reaching nearly $50 a barrel. Opec started a closed-door session at around 10am.
Falih also said Opec was focusing on reducing output to a ceiling of 32.5 million barrels per day, or cutting by more than a million bpd, and hoped Russia and other non-Opec members would contribute a cut of another 0.6 million bpd.
"It will mean that we take a big cut and a big hit from our current production and from our forecast for 2017.
"So we will not do it unless we make sure that there is consensus and an agreement to meet all of the principles," Falih said.
But he added that even if Opec failed to reach a deal, the market would slowly recover "We believe that non-OPEC growth has reversed and also most of the Opec growth we've seen is already behind us," he said.
"If we can't come to an agreement, then the other scenario of rolling over and waiting for the market to recover on its own is not a bad outcome." Clashes between Saudi Arabia and Iran have dominated many previous Opec meetings.
On Tuesday, Iran wrote to Opec saying it wanted Saudi Arabia to cut production by as much as 1 million bpd, more than Riyadh was willing to offer, Opec sources who saw the letter told Reuters.
But the tone changed yesterday. "I'm optimistic," said Iranian Oil Minister Bijan Zanganeh, adding there had been no request for Iran to cut output. He also said Russia was ready to reduce output.
"Moscow have agreed to reduce their production and cut after our decision," Zanganeh said.
The 14-country Opec, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output at around 32.5-33 million bpd versus the current 33.64 million bpd to prop up oil prices, which have halved since mid-2014.
Opec said it would exempt Iran, Libya and Nigeria from cuts as their output has been hit by unrest and sanctions.
The September deal was seen as a victory for Iran, which wants to raise production to regain market share lost under Western sanctions. (Reuters)