Investing.com - Oil prices rose by nearly 9% today, climbing after the Organization of the Petroleum Exporting Countries (OPEC) agreed to slash production. The price of Brent Oil and West Texas Crude Oil both increased on Wednesday, with U.S. crude futures settling at 49.98 and Brent futures settling at 50.45.
OPEC ministers said the production pact had been several months in the making. "Over the past two months, this committee has done some excellent work. The meetings it has undertaken have been extremely constructive, providing us all with a better appreciation and understanding of the various viewpoints among OPEC and non-OPEC producers," said Mohammed Bin Saleh Al-Sada, Qatar's Minister of Energy and Industry and President of the OPEC Conference, in remarks earlier today. "The last time we met as a conference was in Algiers on September 28. This historic occasion, with OPEC Member Countries unified in approving the already mentioned ‘Algiers Accord’, saw an agreement on a new OPEC production target range. The focus was on accelerating the drawdown of the stock overhang and bringing the market rebalancing forward.
The energy minister said that the production cutting agreement will stabilize global oil prices. Oil prices have fluctuated at a rate during the last two months that makes OPEC leaders uncomfortable. "It is vital that stock levels start to fall, as the decision taken in Algiers recognized. As we have seen in previous cycles, once this overhang starts falling on a regular basis then prices start to rise and more stability will return to the market," Bin Saleh commented.
Oil production "remains a growth business," he added, "with oil demand in OPEC’s 2016 World Oil Outlook reaching over 109 million barrels of oil a day by 2040, a healthy increase of over 16 million barrels a day."
This growth will require "significant investments in the upstream, midstream and downstream," he concluded. "Overall, estimated oil-related investment requirements are close to $10 trillion in the period to 2040."
Investors in the U.S. speculated that the oil production slowdown overseas could be good for business in the U.S. Under incoming President Donald Trump, oil exploration is expected to be allowed off the coast of Virginia and off the coast of Florida. Artic and Antarctic exploration, banned by current President Obama, could also be allowed by the Trump White House, and expanded U.S. production is something advocated by former Gov. Rick Perry (R-Texas), who is being touted for Energy Secretary. Oil field equipment stocks from Halliburton Company (NYSE:HAL) and others could also benefit from the trend, analysts said.