On Wednesday, the Organization of the Petroleum Exporting Countries agreed its first oil output cut since 2008 after the Kingdom of Saudi Arabia accepted "a big hit" on its oil production and dropped its demand on arch-foe Iran to decrease output. While non-OPEC member, Russia, will join output cuts for the first time in 15 years to help OPEC support oil prices. Brent crude futures rose as much as 9% yesterday.
The Kingdom was prepared to accept "a big hit" on production to get a deal done, Saudi Energy Minister Khalid al-Falih said ahead of the meeting.
According to this agreement, the Kingdom will take the lion's share of cuts by decreasing its output by 0.5 million barrels per day (bpd) to 10.06 million bpd. Its Gulf OPEC allies – Qatar, Kuwait, and the United Arab Emirates - to cut by a total of 300k bpd.
Iraq, which had insisted on higher output quotas to fund its war against ISIS, unexpectedly agreed to cut its production by 200k bpd.
U.S. crude traded at $50 and could jump to $55 by the end of the week.
Dollar advanced to an 8 and a half month high and settled at ¥115 due to the OPEC agreement.
Technically, the Greenback is unlikely to break the resistance of ¥115, in anticipation of the U.S. non-farm payroll and U.S. interest rate decision.
Euro declined yesterday due to a stronger dollar and anticipation of an interest-rate hike by the Federal Reserve put pressure on the single currency.
Also on Wednesday, the price of Gold fell to its worst one-month percentage loss since June 2013 and settled at $1,174, negatively affected by the OPEC agreement.
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