Oil rallies on OPEC deal; energy leads Wall Street higher

Wed Sep 28, 2016 4:18pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - Oil prices rallied on Wednesday after members of the Organization of the Petroleum Exporting Countries reached an agreement on a production-limiting deal, boosting energy sector shares.

The U.S. dollar was flat versus a currency basket but fell to a near-five month low versus the Norwegian krone NOK=. Norway, although not an OPEC member, is a major crude producer.

Crude oil prices jumped after sources told Reuters that OPEC agreed to reduce its oil output by about 750,000 barrels per day. Country-by-country production is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia, sources said.

U.S. crude CLc1 was up 4.4 percent at $46.63 a barrel and Brent LCOc1 last traded at $48.24, up 4.9 percent on the day.

"This could potentially be very significant, not for the barrels that could be removed from the market, but because it's a signal that the Saudis could be returning to active supply management. That’s the bottom line," said Michael Wittner, global head of oil research at Societe Generale in New York.

"It remains to be seen how many real barrels will be removed from the market. To me, the significance is way beyond that: they all sat down in a room and made a decision."

The move in oil boosted shares in the energy sector of the S&P 500, giving direction to Wall Street indexes that had previously see-sawed near the unchanged line.

The more-than 4 percent gain in the S&P energy stocks .SPNY was the largest for any day since mid January.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. September 22, 2016.  REUTERS/Brendan McDermid