Oil prices have soared after OPEC countries agreed their first cut in production since 2008.

The deal will see the group's member countries reduce production by 1.2 million barrels a day to 32.5 million barrels, effective from January.

The 14-member Organisation of the Petroleum Exporting Countries accounts for a third of global oil production.

Russia, which is not part of OPEC, has also agreed to "gradually" reduce its output by up to 300,000 barrels per day, the country's energy minister Alexander Novak said.

Sky News' Business Presenter Ian King said prices at the pumps would almost certainly rise for UK motorists after Brent crude climbed by over 9% to more than $50 (£40) a barrel on the news.


Shares in Shell and BP were both up by around 4%, having risen during much of the afternoon as OPEC's members moved closer to a deal.

In the US, banking stocks rose and the Dow Jones industrial average reached an all-time high, up 0.4% to 19,188.

Image: Mr al Falih had been optimistic going into the meeting

Aberdeen Asset Management investment strategist Bob Minter said the cut in production was "much bigger" than expected and could send oil prices even higher, to as much as $60 (£48) per barrel.

He added: "It will take a few months to see whether the claimed cuts have in fact been made but they've announced a committee to monitor production so the agreement appears to have teeth.

"Greatly increased demand for oil is not necessarily a given in the years to come: Trump might try to tear up the Paris Accord but it's the likes of India and China that matter the most and they don't want to rely on oil.

"OPEC is going to need to harness all of its powers of coordination and bargaining to chart this existential threat."

The AA's spokesman Luke Bosdet said: "A long spell of higher prices, aggravated by a weak pound, could ravage family budgets as badly as the added cost of winter motoring."

Image: The deal was helped by agreement between Saudi Arabia and Iran, whose oil minister Bijan Zangeneh is pictured

RAC fuel spokesman Simon Williams said pump prices may rise in the short term but OPEC was not the only player in the world oil market.

He added: "It remains to be seen if the United States will respond by increasing yet more oil from fracking which was not profitable when the oil price was lower."

The exchange rate is also "crucial", he said, adding: "As oil is traded in dollars, a weaker pound, like we've seen since the EU vote, can have the effect of pushing prices in the UK up. A stronger pound can have the reverse effect."

A glut of supply on world markets amid slowing demand for energy has put the oil price under severe pressure in recent months and before OPEC's deal was announced it was sitting at less than half its mid-2014 level.

The group had failed to reach an agreement over a number of meetings this year, including one in April when efforts were foiled by rivalry between Saudi Arabia and Iran.

The Saudis had said then that they would only cut production if Iran agreed to do the same.

But Iran, which was readmitted to world oil markets after the nuclear deal between Iran and the US in 2015 and is now free of economic sanctions, was anxious to increase production and make the most of its improved position.

Image: Iran is among the countries which have been allowed to maintain output levels

Going into Wednesday's meeting, Saudi energy minister Khalid al-Falih had said that the kingdom was prepared to accept a "big hit" and to allow Iran to freeze output at the same levels they had been since before sanctions were imposed.

And the Saudis appear to have taken that big hit, agreeing to cut production by almost 500,000 barrels per day to 10.06 million barrels per day.

Iran, Libya and Nigeria were given special dispensation not to cut because they are still trying to regain market share after sanctions or internal conflict.

The UAE, Kuwait and Qatar will cut by a total 300,000 barrels per day while Iraq, which had pushed for a higher quota to fund its fight against Islamic State, surprisingly agreed to cut by 200,000.

News of the deal will also come as a relief to poorer OPEC members, such as Venezuela, which is struggling with severe food shortages and massively high inflation.

Venezuela relies on the oil and gas sector for around 25% of its GDP.