At a meeting of the oil cartel in Vienna on Wednesday, OPEC members agreed on a proposal by Algeria to reduce production by around 4.5 percent. Qatar's energy minister and president of the conference, Mohammed Bin Saleh Al-Sada, told reporters that the reduction would be 1.2 million barrels per day (bpd), to "bring its ceiling to 32.5 million barrels per day."

OPEC's top producer, Saudi Arabia, accepted the biggest hit to its output, reducing its production to 10.06 million bpd - down by 0.5 million bpd.

The deal came about as Saudi Arabia's arch-rival Iran also agreed to the proposal, which called on Teheran to freeze output at close to current levels of 3.797 million bpd. Iraq will cut its output by 200,000 bpd to 4.351 million bpd beginning in January.

In addition, OPEC will exempt Libya and Nigeria from the reductions as their output has been crimped by unrest and sanctions.

Prices for future contracts for North Sea Brent crude oil jumped 8 percent to more than $50 a barrel upon the news that Riyadh had finally reached a compromise with Iran after insisting in recent weeks that Tehran fully participate in any cut.

OPEC watcher Amrita Sen from Energy Aspects said OPEC had proved to the skeptics that it was not dead. "The move will speed up market rebalancing and erosion of the global oil glut," she told the news agency Reuters.

Non-OPEC producers on board

OPEC accounts for a third of global oil production, currently extracting 33.64 million bpd. But its 14 members have been hit hard by falling oil prices which have halved since mid 2014.

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Following the meeting in Vienna, Al-Sada also said that major producers outside the oil cartel had signaled their willingness to join the production cut.

"It will help rebalance the market and reduce the stock overhang," he said, adding that Russia had committed to reducing its output by 300,000 bpd - half of the 600,000 bpd OPEC had hoped for.

Gary Ross, founder of Pira consultancy, said the impact of the deal nevertheless would be huge. "You remove a lot of oil from the market and you get the Russian participation," he told Reuters.

Non-member Azerbaijan already signaled its willingness to participate Wednesday. Energy Minister Natig Aliyev said the move could bring stability and price growth to the market. He indicated his country would attend OPEC's meeting on December 9 if invited.

But there is also skepticism among OPEC watchers and oil market analysts. John Kilduff from Again Capital in New York said the market was still in a wait-and-see mode. "We're going to have to see these cuts truly get implemented. The production trend has been higher."

A view shared by Bob McNally, president of Washington-based consultancy Rapidan group. "In deals with Russia, OPEC is like President Reagan used to say: 'Trust but verify'," he wrote on Twitter.

uhe/kd (Reuters, AFP, dpa)