Oil prices shot up by 4% on Monday after the members and non-members of the Organisation of the Petroleum Exporting Countries reached a deal to jointly reduce production outputs, Reuters reported. Oil producers are hoping that the deal, the first one since 2001, will bring down the oversupply of the commodity in the market as well increase prices.

While Brent crude futures – the international benchmark for oil prices – rose to $57.89 (approximately Rs 3,911.92) per barrel, West Texas Intermediate crude rose to their highest price since July 2015 at $54.51 (approximately Rs 3,683.51) a barrel. Analysts said the cuts by oil producers would see the market move from a surplus to a deficit in supply. Investment firm AB Bernstein said the deal “amounts to an aggregate supply cut of 1.76 million barrels per day from 24 countries which currently produce 52.6 million barrels per day”.

On Saturday, non-Opec members agreed to reduce their production by 5,58,000 barrels per day. Russia will be the biggest contributor to such cuts, gradually reducing production by 300,000 barrels. This came after Opec president Mohammed Bin Saleh Al-Sada on November 30 said that non-member countries were expected to reduce their production by 6,00,000 barrels per day. Al-Sada called the move a “historic moment” and said it will “definitely balance the market”.

The move is expected to provide relief to oil producing nations, which have been seeing stiff competition from the United States. An earlier effort to compete with the US, by drastically increasing supply, saw oil prices dropping to a record low. The move had affected the economies of Opec members.