LONDON: Brent crude is headed for its biggest weekly gain since 2009 after Opec approved its first supply cut in eight years, with attention now shifting to the deal’s implementation and how producers outside the group will react to any price rally.

Futures fell 0.7 per cent in London and were poised for a 13 per cent weekly gain. OPEC’s three largest producers — Saudi Arabia, Iraq and Iran — overcame disagreements to reach Wednesday’s pact to reduce the group’s output by 1.2 million barrels a day, while Russia pledged a cut of as much as 300,000. The deal will accelerate the decline of global stockpiles, Secretary-General Mohammad Barkindo said in a Bloomberg TV interview Thursday.

The Organisation of Petroleum Exporting Countries set a collective output target at the lower end of the range outlined two months ago in Algiers, sending oil prices above $50 a barrel and prompting predictions of a possible rally to $60 from Goldman Sachs Group Inc. and Morgan Stanley. Yet some analysts warned the surge in prices may encourage higher output from producers outside the group, including in the US. The last time the bloc set a collective quota, members exceeded it for 20 of the 24 months before the cap was scrapped at the end of 2015.

“The decision has removed a lot of downside risk from the market and we’ll probably sniff at $60 even this year,” said Bjarne Schieldrop, chief commodities analyst at SEB AB bank in Oslo. “The Opec decision is bullish for first half of 2017 and bearish for the second half because higher prices will bring back US oil faster to the market. There will be a shale party.”

Brent for February settlement lost 37 cents to $53.57 a barrel on the London-based ICE Futures Europe exchange as of 1.34pm local time. The contract climbed 4.1 per cent on Thursday, adding to Wednesday’s 9.6 per cent gain. Total volume traded was 35 per cent higher than the 100-day average. Prices are poised for the biggest weekly gain since the week ended March 20, 2009. The January contract expired on Wednesday.

Exceeding Quota

West Texas Intermediate for January delivery was down 28 cents at $50.78 a barrel on the New York Mercantile Exchange. Prices gained 3.3 per cent to $51.06 a barrel on Thursday and are up 10 per cent this week.

Russia’s output reduction should be spread proportionally between the country’s producers, who have said they support the move, Energy Minister Alexander Novak told reporters Thursday. State-controlled Rosneft PJSC, the country’s largest producer, is likely to bear most of the burden, according to Renaissance Capital. Russia may announce cuts for each company late next week, said Leonid Fedun, vice president for strategic development at Lukoil PJSC.

OPEC’s cuts are intended to shrink the world’s bloated oil stockpiles back to a normal level, paving the way for prices to rise to more than $60 a barrel. “Our objective has been since Algiers to stimulate the joint deal with non-OPEC and accelerate the drawdown of stocks,” Barkindo said. “Inventories have continued to weigh down on prices” and all of Opec wants to see prices higher, he said.