OPEC Agrees to Cut Oil Production, but Some Members Will Still Produce "at Maximum Levels that Make Sense"

Two OPEC sources say output will be reduced to 32.5 million barrels per day

The Organization of the Petroleum Exporting Countries (OPEC) today at an informal meeting in Algeria has agreed to cut crude production, the first such agreement since 2008.

Two OPEC sources said output will be reduced to 32.5 million barrels per day (bpd) from the current 33.24 million bpd - although some sources have said output is currently at a record high of 33.7 million bpd.

The individual production limits for each member will likely be decided in November, but it appears some members will not be included in the deal, with Saudi Energy Minister Khalid al-Falih saying that Nigeria, Libya and perhaps crucially Iran, would be allowed to produce "at maximum levels that make sense".

As to what that maximum level might be is not clear, but Iranian Oil Minister Bijan Zanganeh said that under the agreement his country would limit production "at close to 4 million barrels per day," up form its current 3.6 million bpd.

"OPEC made an exceptional decision today ... After two and a half years, OPEC reached consensus to manage the market," Zanganeh was quoted by his country's media as saying.

Crude prices jumped over 5 percent as a result of the deal, which presumably was a surprise to the many analysts who had written off any chance of a deal taking place - not least because of comments yesterday in which Saudi Arabia energy minister Khalid al-Falih said Algiers would simply be a "consultative meeting" and Zanganeh said "it is not the time for decision-making."

"This was unexpected for sure ... no one that I know of saw it coming. The market doesn't seem positioned for it. The fundamentals in the U.S. are already tighter than we expected and is due to get tighter," said Scott Shelton, energy broker and commodities specialist for ICAP.

For the record, several analysts have said they expect the oil glut to continue regardless of any OPEC deal, but that didn't stop Michael Wittner, global head of oil research at Societe Generale, seeing a positive in today's news.

"This could potentially be very significant, not for the barrels that could be removed from the market, but because it's a signal that the Saudis could be returning to active supply management. That's the bottom line," he said.