Oil prices increase after OPEC plans to cut output

The Dollar Business Bureau

Oil prices increased on Thursday after the producers' group Organisation of Petroleum Exporting Countries (OPEC) surprised the oil market with a deal to cut production. 

After a six-hour meeting and months of speculation, the OPEC group announced its plan to slash output to around 32.5-33 million barrels per day (bpd) from the level of 33.47 billion bpd in the month of August, said the International Energy Agency (IEA). 

The informal meeting between the member nations was organised on the sidelines of the IEA meeting in an effort to stabilise the prices of oil that have been declined by a stubborn oversupply since 2014.

Oil prices surged by around 6 percent after the news of cut in output and extended gains in Asian stock exchanges on Thursday although at a slow pace. 

At 0630 IST, the US benchmark West Texas Intermediate (WTI) for November delivery was increased by 23 cents to $47.29 per barrel and Brent crude for delivery in November increased by 22 cents to $48.91 per barrel. 

The US Energy Information Administration (EIA), a principal agency on energy information, said on Wednesday that crude oil stocks in the world's largest consumer of oil declined by 1.9 million barrels, leading to expectations for an increase of 3 million barrels. 

A drop in crude stocks indicated a stronger consumption and is a positive sign for oil prices. 

The 14-nation cartel, OPEC, which provides almost 40 percent of the world’s crude, will work on the details of each nation’s specific output limits at their next meeting to be held in November in Vienna. The group is also planning to ask the other oil producing nations that are not a part of the group to support it in tackling the oversupply of crude worldwide.