Oil prices increased to its highest in months after the Organisation of the Petroleum Exporting Countries (OPEC) agreed to curb production for the first time since 2008.
In a meeting in Vienna, OPEC members agreed on a deal following days of heated negotiations.
Analysts feared that disagreements between three of its most powerful members – Saudi Arabia, Iran and Iraq – over cuts would block any deal.
However, the 14-member oil cartel agreed to lower its monthly output by 1.2 million barrels per day (bpd) to 32.5 million bpd from 1 January 2017.
The bulk of the cut will be shouldered by Saudi Arabia, while Iran has been allowed to increase its output to levels before it was hit by Western sanctions over its nuclear programme that has apparently been curbed by a deal reached more than a year ago.
While the OPEC deal will benefit all oil producing countries in the long term, Iran’s oil minister Bijan Namdar Zanganeh flashed a victory sign to reporters as he left OPEC’s headquarters having negotiated an increase in production by 90,000 bpd to 3.8 million bpd.
Saudi Arabia, having agreed to cut output to 10.1 million barrels per day, also stands to gain significantly from the hike in oil prices following the curb in production.
Although Riyadh has taken the bulk of production cuts, it is still producing almost three times as much oil as regional rival Tehran, and will therefore still be in possession of a far larger market share. It will therefore balance Iranian gains with an increase in oil prices, and far greater sales.
Russia, which is not an OPEC member, said it was ready only to freeze production but Qatar’s energy minister Mohammed bin Saleh Al-Sada said that Russia has committed to reducing its output by 300,000 bpd.