US open: Investors buoyed by OPEC oil production cut

US markets advanced as investors were buoyed after OPEC members agreed to slash oil production for the first time since 2008, which sent prices soaring.

On opening the Dow Jones Industrial Average rose around 100 pints, hitting a record high on Wednesday.

The Dow Jones Industrial Average climbed 0.52% to 19,220.08 points, the S&P 500 leapt 0.41% to 2,213.62 points, and the Nasdaq gained 0.18% to 5,389.71 points at 1445 GMT.

Brent crude surged past the $50 per barrel mark, rising 7.3%, while West Texas Intermediate jumped 6.8% to $48.57 at 1540 GMT.

OPEC member countries finalised the deal discussed in the Algiers in September to cut production by 1.2m barrels per day, in a bid to push oil prices higher.

According to Gulf Energy, Iran agreed to go freeze production at just under 4m barrels per day, avoiding a cut. The country had been ramping up production after economic sanctions were lifted in January.

But the deal hinges on the world’s biggest oil exporter Saudi Arabia, while rumours swirled that Indonesia may have been suspended from the cartel, which might take around 740,000 barrels per day out of the quota.

Airlines, however, were on the back foot on opening as American Airlines dropped 2.52% to 45.71 cents, Delta Airlines fell 2.55% to 47.42 cents, UAL Corp was down 2.1% to 68.24 cents, and Southwest Airlines decreased 3.83% to 45.47 cents.

James Hughes, chief market analyst at GKFX, said the production deal has come 12 months too late for many as low oil prices have crippled some economies in the period.

“It has been said that the OPEC deal is contingent on non-OPEC members, such as Russia agreeing to participate… The swings in the markets on the back of every tweet that was sent by anyone close to the meeting showed that jitters and expectations that rested on OPEC and any failure could well have sparked some heavy downside for not just oil prices, but equity markets and the US dollar as well.

“All in all OPEC has cut output to levels seen back in April, the same time that Saudi Arabia ramped up production. So without yet having confirmation it does look like we have a deal, but whether it has gone far enough to give oil prices the kick they need, or prove that OPEC is a viable organisation is very much yet to be seen.”

In currency markets, the dollar was up 1.09% against the yen to 113.60, rose 0.52% against the euro to 0.9439 and edged higher by 0.39% against sterling to 0.8036.

On the data front, the ADP national employment report showed that 216,000 jobs were added in November by private employers, above the forecast 165,000. The private payroll increase was revised down to 119,000 from the 147,000 initially reported.

The personal consumption expenditures price index nudged up 0.2% in October after a similar increase in September. In the year to October, the index crept 1.4%, after rising 1.2% in September.

In corporate news, Praxair’s shares were down 1.17% after it confirmed had approached German rival Linde AG about resuming discussions regarding a potential offer.

Elsewhere, Splunk Inc gained 4.05% after it lifted its outlook for the year late on Tuesday, but design software maker Autodesk dipped 5.51% after its guidance for the current quarter left investors disappointed.

Looking ahead, the Federal Reserve’s Jerome Powell is to speak in Washington at 1645 GMT and Loretta Mester is to discuss monetary policy and the economic outlook at 1735 GMT.