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Oil prices resume rise after OPEC cut in 8 years

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Oil prices resumed their rise Thursday and held above the $50 barrier following OPEC’s decision to carry out its first output cut in eight years.

The Organization of the Petroleum Exporting Countries at a meeting in Vienna on Wednesday agreed on specific targets to enact a preliminary deal struck in September designed to ease a global crude supply glut and boost prices.

Many analysts had expected the producers’ cartel to fail to reach a deal as major players like Iran, Iraq and Saudi Arabia remained divided ahead of the meeting.

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Crude futures prices surged more than 10 percent immediately after the OPEC deal.

At 0630 GMT Thursday, after a brief dip in early Asian trade, US benchmark West Texas Intermediate for January delivery was up 70 cents or 1.42 percent at $50.14, while Brent crude for February was 81 cents or 1.6 percent higher at $52.65.

“Not only had hopes of higher prices been realised, the reputation of the OPEC has also been salvaged, prompting the surge,” said Jingyi Pan, market strategist at IG in Singapore.

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“Sceptics have now placed their focus on the implementation of the OPEC deal where Saudi Arabia will be shouldering the bulk of the cut.”

The 14-member OPEC agreed to lower its monthly output by 1.2 million barrels per day (bpd) to 32.5 million bpd from January 1.

Qatar’s Energy Minister Mohammed Bin Saleh Al-Sada said non-member Russia committed to reducing its output by 300,000 bpd, half of a hoped-for 600,000 bpd reduction from outside the organisation.

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Prices had fallen to near 13-year lows of below $30 a barrel in February from peaks of more than $100 in June 2014 largely due to an oversupplied market outpacing demand.

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