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The OPEC oil cartel held tense talks today to try to agree its first output cut in eight years, sending oil prices soaring on hopes it will defy gloomy expectations.
Brent North Sea crude for January delivery jumped USD 3.83 to USD 50.21, the first time it has risen above USD 50 in a month. West Texas Intermediate won USD 3.59 to USD 48.82 per barrel, the highest level in a week.
As OPEC ministers began their meeting, Khaled al-Falih, energy minister of the cartel's biggest producer Saudi Arabia, sounded an upbeat note.
"We don't know (if a deal will be reached)," he said. "We will find out during the meeting. I think the sentiment generally is optimistic and positive."
In comments likely directed at Iraq and regional rival Iran, more reticent about reducing the flow of crude, Falih said that cuts have to be shared around OPEC "in an equitable way".
Iraq's Oil Minister Jabbar al-Luaibi said he was "very optimistic we're going to come with very fruitful results... There will be a cut, yes, definitely," Bloomberg News reported.
In September the cartel agreed in principle to lower production to 32.5-33.0 million bpd, meaning a cut of between 600,000 and 1.1 million barrels per day (bpd).
Falih said he was aiming for the cartel to reduce its output to 32.5 million bpd, while he maintained that non-OPEC producers should limit their production by 600,000 barrels a day.
"It will mean that we take a big cut and a big hit from our current production and from our forecasts for 2017," he said.
The cartel's cut in output would be aimed at reducing the massive supply glut that has depressed prices over the past two years.
But finalising the agreement has proven difficult, with Iran keen to increase oil output to pre-sanctions levels and Iraq short of money to fight Islamic State extremists.
Iran has suggested it freeze production at 3.975 million bpd, or about 200,000 barrels a day above current output, Bloomberg reported Monday.
Saudi Arabia countered with a proposal for Iran to cap output at 3.707 million.
While he stopped short of conceding Iran would freeze or cut its production, Iranian Oil Minister Bijan Namdar Zanganeh said his delegation was looking at "another framework".
"I am optimistic," he said.
However, should the oil ministers fail to agree a deal, experts expect prices to head south, perhaps to USD 40 or even USD 30.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)