Crude oil futures soared higher on Thursday as traders positively reacted to OPEC’s plan to scale back production, according to Bloomberg MarketWatch.
In Algiers, OPEC members agreed to a scaled back production plan on Wednesday. Cartel members agreed on a preliminary outline to cut its collective output to between 32.5 million barrels a day and 33 million barrels a day, down from the levels of 33.2 million barrels a day in August. OPEC hasn’t approved a production cut since 2008.
November West Texas Intermediate crude climbed 78 cents, or 1.7%, to settle at $47.83 a barrel on the New York Mercantile Exchange—the highest futures prices since August 23. On Wednesday, prices rose 5.3%, marking their largest one-day gain since April, following news of OPEC’s output agreement.
November Brent crude, the global benchmark, tacked on 55 cents, or 1.1%, to end trading at $49.24 a barrel on London’s ICE Futures Exchange. The contract expires at Friday’s settlement.
The output target “still results in oversupply,” said James Williams, energy economist at WTRG Economics. For a substantial price increase, and to “get the market in balance or better under supplied and work down the excessive stocks of crude,” OPEC would need to cut about 1.0 million to 1.5 million barrels a day.
“The membership at large may be coming to the realization that the incremental gains in market share to be earned through robust production may not be worth the low spot prices of oil going forward,” said Scott Cockerham, managing director at Huron.
OPEC members will wait until the next official meeting in Vienna on November 30 to complete the details, including the quota for individual producers.
Meanwhile, November natural gas on its first full session as a front-month contract, lost 4.3 cents, or 1.4%, to settle at $2.959 per million British thermal units on the New York Mercantile Exchange.