Oil prices gained more than 6% as Saudi Arabia and Iran surprised traders who expected a continuation of the pump-at-will policy the group adopted in 2014.
The group agreed to drop production to a range of 32.5 to 33m barrels per day, said Iran’s Oil Minister Bijan Namdar Zanganeh, following a meeting in Algiers.
While some members of OPEC will have to cut output, Iran won’t have to freeze production, he said.
Many of the details remain to be worked out and the group won’t decide on targets for each country until its next meeting at the end of November.
The lower end of the production target equates to a nearly 750,000 barrels-a-day drop from what Opec said it pumped in August.
The deal will reverberate beyond the Organization of Petroleum Exporting Countries. It will brighten the prospects for the energy industry, from giants like Exxon Mobil Corp. to small U.S. shale firms, and boost the economies of oil-rich countries such as Russia and Saudi Arabia.
For consumers, however, it will mean higher prices at the pump.
“The cut is clearly bullish,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “What’s much more important is that the Saudis appear to be returning to a period of market management.”
The agreement also signals a new phase in relations between Saudi Arabia and Iran, which have clashed on oil policy since 2014 and are backing opposite sides in civil wars in Syria and Yemen.
The deal indicates that Riyadh and Tehran, with the mediation of Russia, Algeria and Qatar, were able to overcome the differences that sunk another proposal to cap production earlier this year.
Brent crude surged as much as 6.5 percent to $48.96 a barrel in London. The shares of Exxon Mobil, the world’s largest publicly listed oil company, climbed 4.2%, the biggest one-day increase since February.
The stakes for Opec, which pumps 40% of the world’s oil, are high as the International Energy Agency has warned of a weak petroleum market next year. Ian Taylor, the head of Vitol Group BV, the world’s largest oil-trading house, said that the crude market could remain oversupplied until 2018.