Iran’s Oil Minister Bijan Namdar Zanganeh attends the opening session of the 15th International Energy Forum Ministerial meeting in Algiers, Algeria, Tuesday, Sept. 27, 2016. At meetings in Algeria this week, energy ministers from OPEC and other oil-producing countries are discussing whether to freeze production levels to boost global oil prices. (AP Photo/ Sidali Djarboub)
ALGIERS, Algeria (AP) — OPEC nations reached a preliminary agreement Wednesday to curb oil production for the first time since the global financial crisis eight years ago, pushing up prices that had sunk over the past two years and weakened the economies of oil-producing nations.
The deal was reached after several hours of talks in the Algerian capital, though output levels must still be finalized at an OPEC meeting in Vienna in November.
The preliminary deal will limit output from the Organization of the Petroleum Exporting Countries to between 32.5 million and 33 million barrels per day, said Mohammed Bin Saleh Al-Sada, Qatar’s energy minister and current president of OPEC. Current output is estimated at 33.2 million barrels per day.
Benchmark U.S. crude jumped $2.38, or 5.3 percent, to $47.05 a barrel in New York. Brent crude, the international standard, was up $2.72, or 5.9 percent, to $48.69 a barrel in London.
Long-running disagreements between regional rivals Saudi Arabia and Iran had dimmed hopes for a deal at Wednesday’s talks.
Iran had been resistant to cutting production, as it’s trying to restore its oil industry since emerging from international sanctions over its nuclear program earlier this year. According to Wednesday’s deal, Iran exceptionally will be allowed to increase production to 3.7 million barrels a day, according to Algerian participants at the meeting. It is currently estimated to be pumping around 3.6 million but had been aiming for 4 million per day.
The deal was a victory for Algerian officials who shuttled overnight Tuesday and all day Wednesday among participants to try to reach common ground on how to support oil markets. The OPEC officials met informally on the sidelines of an energy conference in Algiers.
“Our optimism was vindicated,” said Energy Minister Noureddine Bouarfaa. “The decision was unanimous, and without reservations.”
Those lower prices have hurt many oil-producing nations hard, particularly OPEC members Venezuela and Nigeria, but also Russia and Brazil.
“We reached a very positive deal,” said Nigerian Oil Minister Emmanuel Ibe Kachikwu. He said all countries will reduce output but the specific quotas will be set in Vienna in November.
Earlier, Iranian Petroleum Minister Bijan Namdar Zanganeh had played down the OPEC gathering, calling it “just a consultation meeting.”
The price of crude oil has fallen sharply since mid-2014, when it was over $100 a barrel, dropping below $30 at the start of this year.
A number of factors have weighed on prices including worries over the scale of the economic slowdown in China. High supply levels from OPEC countries, notably Saudi Arabia, as they seemingly strove to drive U.S. shale gas producers out of business, were also central to the descent.
Saudi Arabia, the world’s biggest oil producer and Iran’s rival for power in the Middle East, appeared to be more amenable to some sort of production limit, certainly more so than in April when OPEC failed to agree on measures to curb supplies.
Saudi Energy Minister Khalid Al-Falih this week promised to “support any decision aimed at stabilizing the market.”
Over the past couple of years, OPEC countries, led by Saudi Arabia, had been willing to let the oil price drop as a means of driving some U.S. shale oil and gas producers out of business. Shale oil and gas requires a higher price to break even.
Venezuela’s Petroleum Minister Eulogio Del Pino said a special meeting would be held ahead of the November OPEC meeting with non-OPEC members to work out quotas.
“We reached consensus to regulate the oil market through reductions in production,” he said. “We hope this decision will stabilize prices.”
Russia, the world’s number two producer, is not an OPEC member but the country’s energy minister, Alexander Novak, took part in meetings in Algiers.