Crude oil and energy exchange traded funds rallied Thursday after the Organization of Petroleum Exporting Countries agreed to the first output cut since 2008, with Saudi Arabia relaxing its position on Iran amid stubbornly low oil prices.
Oil services companies, those among the worst-off during the prolonged depressed oil environment, led the rebound on Thursday, with the Market Vectors Oil Service ETF (NYSEArca: OIH) up 3.0%, SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) up 3.3% and iShares Dow Jones U.S. Oil Equipment Index ETF’s (NYSEArca: IEZ) 2.6% higher.
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Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 2.4% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, rose 1.8% as WTI crude oil futures advanced 1.5% to $47.8 per barrel and Brent crude increased 1.2% to $49.3 per barrel.
“OPEC made an exceptional decision today… After two and a half years, OPEC reached consensus to manage the market,” Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings, said, according to Reuters.
OPEC plans to diminish output to a range of 32.5 to 33.0 million barrels per day from its current estimated output of 33.24 million barrels per day.
“This is the first OPEC deal in eight years! The cartel proved that it still matters even in the age of shale! This is the end of the ‘production war’ and OPEC claims victory,” Phil Flynn, senior energy analyst at Price Futures Group, told Reuters.
Saudi Arabia has been a major opponent to an output freeze, arguing that Iran, which recently began ramping up production after the sanctions were lifted, should also join the cartel in reducing output. However, reversing their previous position, Saudi Energy Minister Khalid al-Falih said that Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits.
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