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Oil heads for second monthly gain as Opec agrees to output cut
[HONG KONG] Oil is set for a second monthly gain after Organisation of Petroleum Exporting Countries (Opec) agreed to reduce production for the first time in eight years.
Futures were little changed in New York, up 6.8 per cent for the month, heading for the first September increase since 2010.
Iran will be exempt from the cuts and an Opec committee will recommend production caps for members at a formal meeting in November after the surprise deal was announced Wednesday.
The agreement represented a "capitulation" to US shale drillers, according to Warwick Energy Group, a privately held investor in thousands of oil wells.
Oil surged the most in more than five months after the announcement of the deal, which will see Opec reduce production to a range of 32.5 million to 33 million barrels a day.
The market was caught by surprise after Saudi Arabia and Iran had signaled before the meeting that an accord was unlikely.
Opec now faces the challenge of implementing the cuts, with Goldman Sachs Group Inc and Morgan Stanley expressing skepticism that it can be completed.
"It's good that Opec is going to limit production but sticking to the deal is the big headwind facing the organisation," David Lennox, a resources analyst at Fat Prophets in Sydney, said by phone.
"We're yet to get the exact details on which countries will contribute the cut, but the Saudis could handle that on their own without too much hassle."
West Texas Intermediate for November delivery was at US$47.74 a barrel on the New York Mercantile Exchange, down nine US cents at 9.05 am Hong Kong time.
The contract rose 78 US cents to US$47.83 on Thursday, capping a seven per cent advance over two days.
Total volume traded was about 50 per cent below the 100-day average. Prices are down about 1.3 per cent for the quarter.
Brent for November settlement, which expires Friday, lost eight US cents to US$49.16 a barrel on the London-based ICE Futures Europe exchange.
Prices are up 4.5 per cent this month and down 1.1 per cent for the quarter. The global benchmark crude was at a premium of US$1.44 to WTI.
The more-active December contract was 12 US cents lower at US$49.69 a barrel.