By Jenny W. Hsu 

Global oil prices continued to rise in early Asia trade on Thursday after the Organization of the Petroleum Exporting Countries agreed to cut production by 1.2 million barrels.

The decision, which marks the group's first concerted effort to slash output since 2008, upended many analysts' expectations and sent prices soaring by more than 9% overnight.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in January recently traded at $49.47 a barrel, up $0.03 in the Globex electronic session. February Brent crude on London's ICE Futures exchange rose $0.05 to $51.89 a barrel, the highest level in more than a month.

Asia-Pacific energy stocks rose following the production deal. Woodside Petroleum Ltd. was 6% higher and Oil Search Ltd. rose 9.6%.

The OPEC cut represents about 1% of global production, which will help to reduce a supply glut that has depressed prices for more than two years. The promised cuts include significant reductions by heavyweights including Saudi Arabia, the group's most powerful member and de facto leader.

Analysts say the biggest question remains enforcement, as OPEC has no authority to make its members to comply. OPEC members have a record of cheating by producing beyond their allotted quotas.

"People are going to be watching closely if the group can now actually live up their pledges," says Stuart Ive, a client manager at OM Financial.

Under the pact, Saudi Arabia is expected to take the lion's share of the cuts by slashing production by 486,000 barrels a day. Iraq agreeing to curb output by 20,000 barrels a day. Meanwhile, struggling producers such as Iran, Nigeria, and Libya were exempt from the deal, as their production has been hampered by sanctions and militant attacks.

The group is expected to reassess the effectiveness of the deal, which will take effect in January, in six months.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

 

(END) Dow Jones Newswires

November 30, 2016 21:56 ET (02:56 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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