VIENNA — Oil prices spiked sharply higher Friday as major oil producers, including the OPEC cartel, agreed to cut global oil production by 1.2 million barrels a day to reduce oversupply.
Following two days of meetings, the Organization of the Petroleum Exporting Countries that includes the likes of Saudi Arabia and Iraq said they would cut 800,000 barrels per day for six months from January, though some countries such as Iran, which is facing wide-ranging sanctions from the United States, have been given an exemption.
The balance will come from Russia and other non-OPEC countries. The United States, one of the world's biggest producers, is not part of the deal.
Following the announcement, U.S. benchmark crude rose 2.2 percent to $52.61 a barrel in New York. Brent crude, used to price international oils, gained 2.7 percent to $61.67 a barrel in London.
"This is a major step forward," said United Arab Emirates' Energy Minister Suhail Mohamed al-Mazrouei, who chairs the regular meetings in Vienna in his capacity as president of the OPEC conference.
Oil producers have been under pressure to reduce production following a sharp fall in oil prices over the past couple of months. The price of oil has fallen about 25 percent recently because major producers — including the U.S. — are pumping oil at high rates.
The stakes just got potentially higher, as the U.S. Geological Survey released a new assessment Thursday that shows portions of the prolific Permian Basin along the Texas-New Mexico state line could hold even more promise with the potential to double the nation's onshore oil and gas resources. The agency estimates more than 46 billion barrels of oil and some 280 trillion cubic feet of gas are within two formations on the southwestern side of the basin. That's the largest continuous oil and gas resource potential ever assessed.
However, agency geologists cautioned that more study would be needed to determine the cost and profitability of going after the resources, which could be hindered if oil prices are too low.
Ann-Louise Hittle, a vice president at oil industry expert Wood Mackenzie, said the production cut Thursday "would tighten" the oil market by the third quarter next year and help lift Brent prices back above $70 per barrel.
"For most nations, self-interest ultimately prevails," she said. "Saudi Arabia has a long-term goal of managing the oil market to avoid the sharp falls and spikes which hurt demand and the ability of the industry to develop supply. On top of this, Saudi Arabia also needs higher oil revenues to fund domestic Saudi spending."
OPEC's reliance on non-members like Russia highlights the cartel's waning influence in oil markets, which it had dominated for decades. The OPEC-Russia alliance was made necessary in 2016 to compete with the United States' vastly increased production of oil in recent years. By some estimates, the U.S. this year became the world's top crude producer.