Oil futures surged on Wednesday following news that OPEC members agreed on the need to cap crude production, according to Bloomberg MarketWatch.
Members of the oil group were considering a production limit of between 32.5 million and 33 million barrels a day, according to The Wall Street Journal, citing sources familiar with the matter. In its oil report released in September, OPEC pegged its current production at 33.24 million barrels a day.
A fourth-straight unexpected weekly decline in U.S. crude inventories also helped to support oil prices.
On the New York Mercantile Exchange, November West Texas Intermediate crude surged $2.38, or 5.3%, to settle at $47.05 a barrel, marking its highest settlement since September 8.
On London’s ICE Futures Exchange, November Brent crude, the global benchmark, climbed $2.72, or 5.9%, to end trading at $48.69 a barrel.
Members of OPEC and other big oil producers met Wednesday on the sidelines of an Algiers energy forum to discuss stabilization options for the oil market. A committee will be formed to study how to carry out the cuts. The committee will provide an update at OPEC’s next official meeting in Vienna on November 30.
“OPEC has agreed to a cap production closer to levels they had back a few months ago,” said Phil Flynn, senior market analyst at Price Futures Group. “That means we will see cuts by Saudi Arabia and Russia, and Iran and Libya and Nigeria will be allowed to increase output.”
Meanwhile, the U.S. Energy Information Administration reported early Wednesday that domestic crude supplies fell unexpectedly for a fourth week in a row. The EIA report also revealed that total U.S. crude oil production edged down by 15,000 barrels a day to 8.497 million barrels a day last week, after a modest increase in the previous week.
Crude oil inventories fell by 1.9 million barrels for the week ending September 23. An increase of 3.2 million barrels was expected by analysts polled by S&P Global Platts, while the American Petroleum Institute reported a decline of 752,000 barrels late Tuesday.
On the New York Mercantile Exchange, October natural gas fell by 4.4 cents, or 1.5%, to end trading at $2.952 per million British thermal units, in volatile trading on the contract’s expiration day. November natural gas, the new front-month contract, settled at $3 per million British thermal units.