Oil is going through the roof following a Reuters report citing sources that say OPEC has reached a deal to limit oil production, with the deal going into effect in November.
- Prices for Brent crude oil, the international benchmark, surged by as much 6.3%, to $49.44 per barrel, around 2:33 p.m. ET.
- WTI Crude is up 4.8%, at $46.82 per barrel, as of 2:45 p.m. ET.
- US energy stocks are rallying on the news, with BP up 3.7%, Exxon Mobil up 4.1%, and Chevron up 3.1% around 2:37 p.m. ET.
- Petro-currencies are rallying as well, with the Russian ruble up 1.1%, at 63.1506 per dollar, and the Norwegian krone up 0.8%, at 8.0466 per dollar, around 2:47 p.m. ET.
Here's the key detail from the Reuters report:
"OPEC agreed on Wednesday to reduce its oil output to 32.5 million [barrels per day] from the current production levels of around 33.24 million bpd, two OPEC sources told Reuters. ...
"One source also said that once production targets were reached, OPEC would reach out to non-OPEC producers for cooperation."
OPEC has been holding much-buzzed-about talks in Algiers as members of the oil cartel become increasingly burdened by economic and financial pressures in light of lower oil prices.
Most analysts didn't get their hopes up ahead of the event, arguing that political tensions and long-run strategic market interests could once again keep the cartel from agreeing.
However, Helima Croft, the global head of commodity strategy at RBC Capital Markets, was more optimistic last week. She argued in a note that the "odds are in favor of the cartel opting for pragmatism and announcing a moderately constructive framework."
As she and her team explained in greater detail:
"This time, we believe that the environment is more conducive to some type of deal, and if there is not enough time to iron out all the details in just a few days, the ensuing statement will strongly suggest a willingness to act at the November meeting (assuming that market conditions remain challenging). Perhaps most compelling, many of the biggest and most influential producers are close to maxing out and hence may judge that there is little downside to agreeing to cap output at current levels or sign up again for a collective ceiling."
Furthermore, her team had previously noted that things have gotten tougher at home financially for both the Saudis and the Iranians — and their publics have started to notice.
As such, "while the Saudi-Iranian regional rivalry could still upend the talks, we contend that these countries have the capacity to opt for pragmatism in order to secure some financial relief," the analysts wrote.
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