In a major development, OPEC agrees to cut oil output in November

For the first time since 2008, the Organisation of Petroleum Exporting Countries (OPEC) has agreed to modestly cut its oil output.

“Opec made an exceptional decision today... After two and a half years, Opec reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh.

A decision has been made to decrease daily output by around 700,000 barrels per day (bpd). After the cut, the daily output is expected to reduce from 33.24mbpd to 32.5-33mbpd.

The move will re-establish OPEC production ceilings that were abandoned a year ago.

Although the first step has been taken, exactly how much output each country will reduce will only be decided in the next OPEC meeting in November. At that time, Russia will also likely be invited to join in the cuts.

Oil prices jumped more than 5% to trade above $48 per barrel. Brent crude settled up $2.72, or 5.9%, at $48.69 a barrel, hitting a more than two-week high of $48.96.

Many traders said they were impressed OPEC had managed to reach a compromise after years of discussions.

“This is the first OPEC deal in eight years! The group proved that it still matters even in the age of shale! This is the end of the ‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy analyst at Price Futures Group.