NEW YORK (DTN) -- New York Mercantile Exchange oil futures rallied this afternoon on reports the Organization of Petroleum Exporting Countries unexpectedly reached an agreement during informal talks in Algeria to rein in oil production.
Several news wires reported OPEC agreed to limit its total output to 32.5 million bpd effective November, which would represent a cut of 700,000 barrels per day (bpd) from their August production level. In its September Oil Market Report issued about two weeks ago, OPEC quoted secondary sources when it said its total output stood at 33.237 million bpd in August.
The news reports about today's agreement to cut production are based on sources at the talks, with the cartel expected to issue a communique later this afternoon outlining details of the agreement.
The reports said the deal was brokered by Algeria, with Saudi Arabia making most of the concessions. OPEC wants to stabilize the market sooner than in 2017, analysts said. Supply quotas for individual OPEC members will be decided at the cartel's regularly scheduled summit set for November in Vienna.
The deal doesn't include Russia, which is not an OPEC member. OPEC is expected to reach out to other non-OPEC producers in due course seeking cooperation in lowering production. This would be the first time in eight years OPEC has agreed to restrain output.
NYMEX November West Texas Intermediate crude futures spiked $2.38 to a $47.05 barrel (bbl) settlement, ending near a $47.45 three-week spot high. The ICE November Brent futures contract rallied $2.72 to $48.69 bbl settlement, off a $48.96 three-week spot high.
In products trade, the NYMEX October ULSD futures contract soared 8.11 cents to a $1.4910 gallon settlement, having posted a $1.4946 one-month spot high. The November contract rose 7.95 cents to $1.4956.
NYMEX October RBOB futures settled 8.40 cents higher at $1.4777 gallon after rallying to a one-month spot high of $1.4867.
The October product futures contracts will expire Friday afternoon.
Earlier, the Energy Information Administration showed bigger stock draws for crude oil and distillates than the market expected for the week-ended Sept. 23 and a nosedive in gasoline demand.
EIA said domestic inventories of crude and distillate fuel were both drawn down 1.9 million bpd last week, and gasoline supply increased 2.0 million bbl.
The EIA report was bearish for demand overall, although did show a large 340,000 bbl jump in implied demand for distillate fuel to 3.772 million bpd. However, implied gasoline demand plunged 770,000 bpd last week to an 8.88 million bpd eight-month low.
Overall demand for oil products were down 205,000 bpd to 19.226 million bpd during the week ended Sept. 23, while crude inputs at U.S. refineries tumbled 253,000 bpd to 16.334 million bpd.
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