OPEC and it allies announced Friday crude output cuts of 1.2 million barrels per day (mbpd) to balance the global oil market.
Members agreed the cartel will curb production by 800,000 mbpd, while non-OPEC oil producers, including Russia, will cut by 400,000 bpd.
The supply cuts will be from October 2018 production levels of participating countries, and will take effect in January to last six months, according to a joint communique from the cartel and its allies, dubbed as OPEC+.
The deal and its impact on the market will be reviewed in April 2019, when OPEC+ meet to make decisions for July and beyond.
Crude prices jumped more than 5 percent on the news. International benchmark Brent crude climbed 6 percent to $63.70 at 1600GMT. American benchmark was at $54.22 — a gain of 5.3 percent.
OPEC said the global economic growth outlook for 2019 is slightly lower than for 2018, and could potentially have ramifications for global oil demand next year.
It added 2019 would suggest higher oil supply growth than global requirements.
OPEC’s heavyweight Saudi Arabia’s crude production reached a record 11.1 mbpd in November, according to Saudi Energy Minister Khalid al-Falih.
Al-Falih told reporters his country’s crude production stood at 10.7 mbpd in October, but is now preparing to lower it to 10.2 mbpd for January.
That means Saudi Arabia, the world’s biggest crude oil exporter, would absorb most of cuts by curbing its supply by 500,000 bpd.
“I thank Saudi Arabia for taking a bigger burden than its market share,” Russian Energy Minister Aleksandr Novak said at the press conference.
He said OPEC+ countries would continue to monitor the global oil market.
Russia, the world’s second biggest crude producer after the U.S., has agreed to curb its supply by around 228,000 bpd– 2 percent of its 11.4 mbpd production level in October, according to Novak.
President of the OPEC Conference Suhail Mohamed Al Mazrouei told reporters that Iran, who faces U.S. sanctions on its crude exports, along with Libya and Venezuela, would be exempt from the agreement.
The deal on cuts may not sit well with U.S. President Donald Trump.
“Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!” he wrote Wednesday on social media.
Al-Falih said “low prices are actually not good for the U.S. economy, because oil and gas production generates a lot of economic activity.
“Shale plays across the U.S. is one reason the U.S. growing faster than other economies,” he added.
With the shale oil revolution that started in 2008, American crude oil production rose from 5 mbpd to a record high level of 11.7 mbpd recently, and the U.S. has become the world’s biggest crude oil producer.