Economic security

Oil prices surge as OPEC reaches deal to cut production by 1.2 million barrels

The Organization of the Petroleum Exporting Countries (OPEC) has agreed to cut supply by 1.2 million barrels per day (bpd) to 32.5 million barrels, the head of the organization announced.

Ahead of the official announcement, Bloomberg broke the news, quoting an unnamed delegate in Vienna. Crude prices soared more than 7 percent on the report.

As of 16:29 GMT, Brent crude was trading at nearly $50 per barrel, while US crude benchmark WTI was above $48.

Calling the decision "historic," the organization said the output cut would be in effect from January 1, 2017.

The deal was reached after weeks of negotiations, as Saudi Arabia, Iraq and Iran fought for the very last barrel of production. This is the first coordinated cut from OPEC in eight years.

According to the new agreement, Saudi Arabia will reduce its production by 486,000 bpd, the official announced.

Ministers of Iraq and Kuwait said their countries would reduce supplies by 209,000 bpd and 130,000 bpd respectively.