By Jenny W. Hsu 
 

Crude oil prices rose in early Asia trade Thursday after the Organization of the Petroleum Exporting Countries surprised the market by agreeing to a framework to cut production.

The group proposed cutting its collective output to between 32.5 million barrels a day and 33 million barrels a day, down from the levels of 33.2 million barrels a day in August, national oil ministers said. This is the first time the group has agreed to cut production since 2008.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at $47.15 a barrel at 0050 GMT, up $0.10 in the Globex electronic session. November Brent crude on London's ICE Futures exchange rose $0.03 to $48.72 a barrel.

Energy stocks in the region were also higher. In Australia, Oil Search was up 6.1% and Woodside Petroleum gained 5.7%. Japanese oil explorer Inpex Corp. was up 7.2%, while China National Petroleum Corp, China's largest oil producer, was up 2%. Commodity stocks also gained with BHP Billiton higher by 3.6% and Rio Tinto up 2.3%.

The move is a turnaround from the cartel's "market-share first" tactic, signalling that perhaps even large producers are feeling the pain of prolonged low prices.

Prices had surged over 5% overnight to their biggest gains in five months, following news that the 14-member bloc had agreed Wednesday that a production cut is necessary to buoy oil prices, which has been weighed down by a persistent glut. The group will wait until November 30 to finalize the decision.

Efforts to freeze or cut production since oil prices started falling in mid-2014 had failed so far. Talks in April this year broke down when Iran refused to participate.

"This should remove the systematic risks in the global banking system with leveraged loans to oil exporting countries and upstream oil producers," said Gordon Kwan, the head of oil and gas research at Nomura. The move will also eliminate risk of further devaluation of the Middle East.

However, the minor gains seen in the Asia session reflect the intense skepticism in the market on OPEC's commitment in actually implementing the plan.

Goldman Sachs noted that pushing up the prices via a production cut among the low-cost producer is "self-defeating" because it would provide more premium for oil drillers around the world to return to the oil patches. Moreover, it would leave the low-cost producers with only one choice to increase revenue: volume growth.

"The jury is still out whether OPEC will take any real actions," said Ben Le Brun, an analyst with OptionsXpress, saying the global oil markets will face a high degree of uncertainty leading up to the late November meeting as OPEC members will battle over who will be exempt from the deal and who should take a steeper cut.

For example, Iran, Libya, Nigeria may fight to postpone cutting their production until their output resumes their peak level.

"In any case, this is still kicking the can down the road to the formal OPEC meeting on November 30, where individual country quotas might be decided," said Citi Research in a note.

Nymex reformulated gasoline blendstock for October--the benchmark gasoline contract--rose 60 points to $1.4837 a gallon, while October diesel traded at $1.4960, 50 points higher.

ICE gasoil for October changed hands at $436.75 a metric ton, up $20.75 from Wednesday's settlement.

Benoit Faucon, Georgi Kantchev, and Selina Williams in Algiers contributed to this article.

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

(END) Dow Jones Newswires

September 28, 2016 22:28 ET (02:28 GMT)