OPEC Agrees to First Production Cuts Since 2008; Oil Soars 8 Percent

Crude oil prices rallied sharply higher on Wednesday after OPEC agreed to curb oil production for the first time since 2008. The decision went down to the wire although traders were betting early in the session that the deal would get done before the end of the official meeting in Vienna.

Prices surged as much as 8 percent on Wednesday, reaching a five-week high after OPEC said it agreed on a proposal to reduce output by 1.2 million barrels per day, or about 4.5 percent, to 32.5 million barrels per day.

January Brent crude oil was up $3.67, or 7.9 percent, at $50.05. January West Texas Intermediate (WTI) crude futures rose $3.50, or 7.7 percent, to $48.73 a barrel, a one-week high.

The details of the deal are still coming out, but it is being reported that Saudi Arabia would contribute around 486,000 barrels per day by reducing output to about 10.06 million bpd.

Iran pledged to freeze output at 3.797 million bpd and other members would also cut production. This figure is slightly higher than the production Iran reported in October. It was 3.69 million barrels per day.

The details of Russia’s cuts have not been released yet.

U.S. Stocks

U.S. equity indexes were mixed on Wednesday. Energy stocks surged on the OPEC news, dragging up the S&P 500 Index and the Dow Jones Industrial Average. However, investors were also focused on other U.S. economic data.

The Dow was up about 100 points, hitting a new record intraday high, before retreating. The benchmark S&P 500 Index gained about 0.1 percent. This rise was attributed to the spike in energy stocks. The Energy Select Sector SPDR Fund (XLE) popped about 5.2 percent higher. The NASDAQ Composite, which is light on oil stocks, declined about 0.6 percent.

Forex

December U.S. Dollar Index futures rose, but that may have been because of other economic data. The commodity-linked AUD/USD and NZD/USD were surprisingly sharply lower. The Canadian Dollar was also struggling to hold on to its gains.

Economic News

According to Moody’s Analytics and ADP, private companies added 216,000 jobs in November, well above the expected 165,000. Traders believe this means Friday’s U.S. Non-Farm Payrolls report will show strong gains.

Consumer spending rose 0.3 percent in October, while personal income gained 0.6 percent, the best showing since April.

Later today, the Fed will release its latest Beige Book.