Oil adds 2% as OPEC reaches deal to cut output

Oil futures rose in American trade on track for the second weekly profit in a row as the dollar index gave up ground for the day, after OPEC announced an agreement to cut output by 800 thousand bpd through the first half of 2019, while independent producers will cut 400 thousand bpd from October levels. 

As of 08:37 GMT, US crude futures due in January rose 1.92% to $52.48 a barrel, while Brent February futures rallied 2.45% to $61.53 a barrel, as the dollar index shed 0.23% to 96.59. 

The US Energy Information Administration reported a drop of 7.3 million bpd in US crude stocks last week, the first such drop since September 14. 

More importantly, OPEC announced an agreement to cut total output by 1.2 million bpd in coordination with allies such as Russia, with the cuts to start in January and with Iran, Libya, and Venezuela, gaining exceptions from the required cuts.

Russia's current output stands at about 11.37 million bpd, while recent reports indicate that Saudi Arabia's production increase by 0.5 million bpd last month to up to 11.3 million bpd, as US output steadied at record highs at 11.7 million bpd.

The concerns remain that OPEC might fail to contain the supply glut looming in the horizon despite the decision to cut output by 1.2 million bpd, as demand is expected to take a hit in major economies. 

Otherwise, Baker Hughes reported a drop of 10 rigs in the US oil rig count last week to a total of 887 rigs.