VIENNA -- OPEC ministers agreed Wednesday to cut crude-oil output, scrapping a strategy to squeeze U.S. competition through high supply that had backfired by gutting prices and draining the cartel's own economies.
It was the first agreement by the Organization of the Petroleum Exporting Countries cartel to reduce output since 2008.
The reduction of 1.2 million barrels a day is significant, leaving OPEC's daily output at 32.5 million barrels. And OPEC President Mohammed Bin Saleh Al-Sada said non-OPEC nations are expected to pare an additional 600,000 barrels a day off their production.
"The economics of this deal made so much sense for everybody," Jeff Currie, head of commodities research at Goldman Sachs Group Inc., said on Bloomberg TV. "All the parties involved should view this as successful."
The combined cut will result, at least in the short term, in somewhat more pricey oil -- and, by extension, gasoline, heating and electricity.
The price for Brent crude, the international benchmark for oil, jumped 8.3 percent, or $3.86, to $50.24 on Wednesday. West Texas Intermediate crude for January delivery rose $4.21, or 9.3 percent, to $49.44 a barrel on the New York Mercantile Exchange.
The average price for a gallon of gasoline nationally rose 2 cents Wednesday to $2.15, up from a $2.04 a year ago, according to auto club AAA. In Arkansas, gasoline cost $1.91 a gallon Wednesday, up from $1.87 a year ago.
In the longer term, analysts say it's unlikely that oil will return to the highs of around $100 a barrel last seen two years ago. That's partly because President-elect Donald Trump has promised to free up more oil drilling in the U.S., which would increase global supply. Demand is also not recovering as the world economy sags.
Calling the agreement "a historic moment," Al-Sada said Wednesday's move "will definitely balance the market and help [in] reducing the stock overhang."
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Al-Sada said the OPEC cutback is to take effect Jan. 1, with consultations planned on the exact timing of the non-OPEC reductions. Russia alone is committed to taking 300,000 barrels a day off the market. A barrel of oil contains 42 gallons.
With the production cut, OPEC will not only benefit from gaining more dollars per barrel, but it can also lay claim once again to playing a part in influencing world prices.
And analysts said OPEC's tentative alliance with Russia and other non-OPEC nations may give it -- and them -- additional clout in future competition for market share with U.S. producers, which are sure to return in increasing numbers if crude prices move upward.
Wednesday's decision was a departure from years of infighting among members refusing to give up their market share and a resulting series of inconclusive meetings.
In another reflection of newfound discipline within the cartel, Al-Sada said Indonesia's membership had been suspended after it refused to accept its share of proposed output cuts, reducing the number of OPEC countries to 13.
Part of the focus after Wednesday's decision is how well it holds. OPEC gave up assigning quotas in part because members have ignored them in their quest for petrodollars.
But officials were displaying new confidence. In comments addressed to people who question his organization's relevance, Al-Sada said its decision "means the weight of OPEC and the resiliency of OPEC is still there and it will continue to be there."
"Today's unity is a very explicit sign about the position of OPEC," he said.
Meetings to turn the planned non-OPEC cuts into reality are planned next month in Doha, Qatar. From Moscow, Russian Energy Minister Alexander Novak confirmed his country's readiness to pare 300,000 barrels from its output, adding that it would happen gradually "within a short period of time based on technical capacity."
Al-Sada said the OPEC cutbacks are in effect for six months with the option of renewal after a review by a five-nation committee set up to monitor compliance.
Still, analysts suggested price upswings would be relatively moderate -- and the fallout minimal, at least for the United States. Sal Guatieri, senior economist at BMO Capital Markets, said oil should rise to an average $53 a barrel next year.
For the U.S. economy, that's "a sweet spot ... a high-enough price to spur investment in the energy industry but not enough to seriously drain purchasing power" of consumers, he said.
"The losers are Europe and Japan -- oil-importing regions of the world" with barely growing economies, said Guatieri.
Some of the best performers in U.S. stock markets Wednesday were those hardest hit by the downturn in oil prices that started in mid-2014 and accelerated five months later when OPEC declined to reduce output. California Resources Corp. and Oasis Petroleum Inc. were among the day's biggest gainers, posting advances of more than 25 percent each. Continental Resources Inc., whose majority owner Harold Hamm predicted as far back as 2014 that OPEC would crack before U.S. shale drillers, surged 25 percent.
"Assuming OPEC makes good on an apparent production-cut deal, U.S. oil production growth is all but guaranteed to return in 2017," said Joseph Triepke, founder of Infill Thinking, a Dallas-based oil research firm, and a former analyst at Citadel LLC's Surveyor Capital unit. "All U.S. [shale] plays will benefit, but none more than the Permian, where we estimate as many as 150 rigs could be reactivated next year if the OPEC deal holds."
Shares of rig operators and the companies that help explorers fracture and perform other technical tasks involved in pumping crude from the ground jumped the most in seven years, mirroring the gains for oil producers buoyed by the OPEC deal.
While an OPEC cut would be encouraging, investors should avoid "sharp recovery hype" and be selective, oil-field services analyst Matt Marietta told clients in a research note Wednesday.
"We reiterate our view that structurally oversupplied crude markets will take more time to balance," wrote Marietta, a Stephens Inc. analyst in Houston. "The math suggests an ongoing imbalance is likely to persist well into 2017, even with an OPEC cut, and no U.S. growth."
One of the biggest hurdles to Wednesday's deal had been a rivalry between Saudi Arabia and Iran, whose struggle for dominance in the Mideast is also playing out in OPEC.
The Saudis had long been hesitant to shoulder the lion's share of a cut, while Iran had resisted reducing its own production. It argued that it has yet to recover its output levels hit by years of sanctions and that the onus was on the desert kingdom to pare the most.
Reflecting their compromise, documents from the meeting showed the Saudis committed to chopping 486,000 barrels off the 10.544 million barrels they were pumping as of October. Iran's quota was set at 3.797 million barrels a day, down 90,000 barrels from October.
All other members cut as well, ranging from tiny Gabon's 9,000-barrel reduction to an Iraqi drop of a daily 210,000 barrels. Nonmember Russia was producing over 11 million barrels a day in October.
Information for this article was contributed by George Jahn, Kiyoko Metzler, Paul Wiseman and Vladimir Isachenkov of The Associated Press and by Joe Carroll, Alex Nussbaum, Alix Steel, Mark Shenk and David Wethe of Bloomberg News.
A Section on 12/01/2016