The Organization of Petroleum Exporting Countries concluded a deal to curb oil supply, its first cut in eight years, bolstering crude oil prices and energy-related ETFs.
Leading market gains on Wednesday, the SPDR Oil & Gas Equipment & Services ETF (NYSEArca: XES) jumped 12.8%, PowerShares DWA Energy Momentum Portfolio (NYSEArca: PXI) surged 11.7% and PowerShares S&P SmallCap Energy Portfolio (NasdaqGM: PSCE) advanced 11.1%. The broader Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy ETF, was 5.7% higher.
SPDR Oil & Gas Equipment & Services ETF
Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 9.3% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, rose 9.8% with WTI crude oil futures trading at $49.3 per barrel and Brent crude at $50.2 per barrel.
Iranian Oil Minister Bijan Namdar Zanganeh told reporters in Vienna Wednesday that OPEC will cut output by 1.2 million barrels per day to 32.5 million barrels per day, Bloomberg reports.
In a reversal of previous sentiments, Saudi Arabia accepted Iran’s higher output target as a special case. Previous OPEC talks broke down after Iran, which suffered from curtailed exports under strict global sanctions, argued for increasing its output to pre-sanction levels.
The sudden shift in OPEC’s policy from maximum output to its traditional role price-fixing cartel is seen as a response to diminishing the ongoing global supply glut and as a band-aid for ailing finances among oil-producing countries.
“This should be a wake-up call for skeptics who have argued the death of OPEC,” Amrita Sen, chief oil analyst at Energy Aspects Ltd, told Bloomberg. “The group wants to push inventories down.”
Other non-OPEC oil suppliers may also join in the cuts. For instance, Russia, the largest producer outside of the bloc, has stated it is ready to participate in reductions if OPEC agrees on individual country quotas.
“It’s a good day for the oil market, it’s a good for the oil industry,” Saudi Energy Minister Khalid al-Falih, told to the Wall Street Journal. “Our friends from Russia and other non-OPEC countries have agreed to reciprocate and contribute significant volumes of cuts starting in January next year.”
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