London/ New Delhi, Sep 29 (IANS) Oil prices surged over 5 per cent on news that the Organisation of Petroleum Exporting Countries (OPEC) had reached an agreement to freeze output, even though rates dropped a bit in early trade on Thursday as traders took profits following overnight gains.
UK Brent crude dipped 37 cents to $48.32 a barrel on Thursday morning on the London ICE Futures Exchange, after rising to $49.09 on Wednesday, while US West Texas Intermediate fell 18 cents to $46.87 on the New York Mercantile Exchange.
Describing the OPEC Algiers meeting as "historic", the current head of the producers cartel, Mohammed Bin Saleh Al-Sada of Kuwait, said at a press conference after Wednesday's meeting that members agreed to cap oil output between 32.5 and 33 million barrels a day.
Al-Sada noted that after a six-hour meeting, the 14 members agreed to reduce oil output, adding that a committee has been set up to consider the output share of each member nation.
A report would be drawn up by the committee, and then filed at the next OPEC meeting due in Vienna in November, he said.
The official further indicated that the committee is also meant to coordinate a collective agreement between the cartel's members in a bid to accelerate the process of re-balancing the oil market "by sharing the burden of adjusting the output between both OPEC and non-OPEC producers".
"Today, an exceptional decision was made at OPEC," Iran's Oil Minister, Bijan Zanganeh, was quoted as saying by the Iranian oil ministry news agency SHANA, following the Algiers meeting.
Amid a global supply glut, OPEC's leading producer Saudi Arabia had recently indicated that there is no output freeze in the offing, and also refused to agree to any production curbs unless its rival Iran agreed to the same, too.
OPEC member Iran has been ramping up production to its pre-sanctions levels despite the recent supply glut. It was earlier reported that Iran's crude oil exports touched a five-year high in August at 2.11 million barrels per day -- up 15 per cent from its July exports.
Oil prices have fallen by more than two-thirds, from over $100 a barrel to under $30 between June 2014 and January 2016. Prices have recovered somewhat this year, rising to nearly $50 in May, before dropping to just over $40 a barrel in recent weeks.
Following its June meeting in Vienna when it decided against an output cut, OPEC, which accounts for 40 per cent of global crude output, said in a statement that its members were committed to a "stable and balanced oil market and that the market is moving through the balancing process".
A Dubai-based regional research firm said on the eve of the OPEC meeting that the oil producers cartel needs to cut production to sustain a rise in crude prices above $50 a barrel.
Now, each member's output levels will be decided at the next formal OPEC meeting in Vienna in November, when non-OPEC countries such as Russia could also be invited to join the cuts.
In Russia, which is a major oil producer, its RTS share index rose 2.4 per cent after news of the agreement in Algiers.
However, the Indian rupee on Thursday tumbled to its lowest level in the last one week after the army announced that it had carried out "surgical strikes" on terror camps across the Line of Control (LoC).
The Indian basket, composed of 73 per cent sour grade Dubai and Oman crudes, with sweet grade UK Brent making up the rest, closed trade on Wednesday at $43.48 per barrel.
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