Oil prices shot up after major producers announced a big production cut.
The West Texas Intermediate for November delivery increased 1.24 US dollars, or 1.4 per cent, to settle at 87.76 dollars a barrel on the New York Mercantile Exchange. Brent crude for December delivery added 1.57 dollars, or 1.7 per cent, to settle at 93.37 dollars a barrel on the London ICE Futures Exchange.
The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, on Wednesday decided to reduce production by 2 million barrels a day starting in November.
The decision to cut stemmed from “the uncertainty that surrounds the global economic and oil market outlook,” the group said in a statement.
“The production cut is OPEC+’s reaction to the marked price slide of recent months,” and would help rebalance the oil market, Carsten Fritsch, energy analyst at Commerzbank Research, said Wednesday in a note.
Concerns about demand amid growing recession risks and the sharp appreciation of the US dollar caused oil prices to fall at the end of September to their lowest level since January.
Traders also digested data on US fuel stockpiles.
The US Energy Information Administration (EIA) said that the nation’s commercial crude oil inventories decreased by 1.4 million barrels during the week ending September 30. Analysts polled by S&P Global Commodity Insights had expected US crude supplies to show fall of 1.5 million barrels.
According to the EIA, total motor gasoline inventories decreased by 4.7 million barrels last week, while distillate fuel inventories decreased by 3.4 million barrels.