Oil jumped more than a dollar to above $60 on Thursday after an OPEC delegate said the producer group will cut output by 1 million barrels per day as soon as possible to prop up prices.
Top world exporter Saudi Arabia will lower production by 300,000 barrels per day as part of the plan, the delegate said. Oil has slid from a peak of $78.40 in July, alarming OPEC, partly due to brimming inventories.
“Prices would have kept coming down unless we saw concrete action by OPEC,” said Adam Sieminski, analyst at Deutsche Bank. ”The build in inventories is telling you the market is pretty well supplied.”
The price of U.S. crude was lately up $1.25 at $60.66. London Brent surged $1.45 to $60.67 a barrel.
The plan by the Organization of the Petroleum Exporting Countries, which pumps more than a third of the world’s oil, expands on token supply cutbacks announced last week by Nigeria and Venezuela.
“The goal now is to cut actual oil production by 1 million barrels daily as soon as possible but the exact date is still being worked out,” the delegate said.
The reduction will be OPEC’s first output cut since April 2004. The group’s official output limit has stood at 28 million bpd for more than a year.
All OPEC countries apart from Iraq, exempt from OPEC supply quotas, and Indonesia, a net importer, are to take part in the supply curbs, the senior delegate said.
Oil has come under pressure from brimming inventories in the United States, the world’s largest oil consumer, and hit an eight-month in New York low on Wednesday.
U.S. crude stocks rose 3.3 million barrels last week, countering expectations for a drop, while distillate supplies rose 200,000 barrels, remaining at the highest level since 1999.
The high level of global fuel stockpiles is a greater concern to OPEC than the price of oil, the delegate said.
Oil also drew support from a fresh outbreak of violence in the oil-producing region of Nigeria, Africa’s top producer.
Nigerian militants said on Wednesday they killed 17 soldiers in two separate gun battles in the country’s oil heartland and threatened further attacks on oil facilities.
The world’s eighth-largest oil exporter has already shut down more than a quarter of its oil output for most of this year because of civil unrest.