Oil prices surge on hopes of Opec deal

Oil breaks $49 a barrel as Opec begins debate on output cuts

Saudi-Iran rivalries could scuttle a tentative OPEC deal

Oil prices have soared as hopes rise once more that the Organisation of the Petroleum Exporting Countries (Opec) could agree to an output cut at its meeting in Vienna.

The group met on Wednesday to discuss terms of a potential deal to cut production for the first time in eight years in an effort to prop up prices that have fallen by more than half since 2014 due to oversupply.

Brent crude has surged by over 7 per cent to $50, after a flurry of comments from Opec ministers.

The rise in oil prices has also contributed to a strengthening dollar. The dollar was up over 0.5 per cent against the Japanese yen as the meeting began.

Saudi Arabia's energy minister said that the sentiment was "optimistic”.

"We don't know [if a deal will be reached]," Khalid al-Falih said as the talks started.

"We will find out during the meeting. I think the sentiment generally is optimistic and positive," he added.

Iraqi oil minister Jabbar al-Luaibi said Opec ministers were unanimous in favour of an output cut, following a breakfast meeting.

"The extent of the [price] move shows no one wants to miss the boat. There must be a general consensus that there will be a cut, whether it’s going to be bullish, I don’t know, but it’s the domino effect," Tamas Varga, analyst at PVM Oil Associates said.

A deal would be aimed at cutting into a global oversupply of oil that has severely depressed prices since 2014. A proposal would probably mean the group cutting production by more than a million barrels a day, which represents about 1 per cent of the global oil supply.

Analysts at Goldman Sachs, Barclays, and ANZ agree that oil prices will quickly rise above $50 per barrel should Opec come to an agreement. Without a deal, the consensus is for a fall to the low $40s.

Paul Sirani, chief market analyst at Xtrade, said: “With the economies of many Opec member nations near wholly dependent on high oil prices to function, a deal to cut oil production looks to be close. The recent rally to almost $50 a barrel following ...Jabbar al-Luaibi’s announcement is testament to that.

“However, If today’s Opec meeting fails to bring about the necessary agreement, then we could well see the price of the North Sea benchmark sailing south at a rate of knots towards the $40 mark and possibly below."

Additonal reporting by Reuters