The agreement to cut production is the first one since 2008, though final decision on the limits will be made in November.

Oil prices jumped more than 5 percent as the Organisation of the Petroleum Exporting Countries (OPEC) struck a deal to limit crude output. This first agreement to cut production since 2008 will be finalised at the policy meeting in November.

“OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings.

Reuters informs that OPEC would reduce output to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd.

“We have decided to decrease the production around 700,000 bpd,” Zanganeh marked.

The initiative will considerably re-establish OPEC production ceilings abandoned a year ago. However, the final decision on how much each country will produce will be made at the next formal OPEC meeting in November. At that time, non-OPEC countries such as Russia will be invited to join cuts.

“This is the first OPEC deal in eight years! The cartel proved that it still matters even in the age of shale! This is the end of the ‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy analyst at Price Futures Group.

“I want to hear from the mouth of the Iranian oil minister that he’s not going to go back to pre-sanction levels. For the Saudis, it just goes against the conventional wisdom of what they’ve been saying,” stated Jeff Quigley, director of energy markets at Houston-based Stratas Advisors.

According to Saudi Energy Minister Khalid al-Falih, Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits. That means a strategy shift for Riyadh, the capital of Saudi Arabia, that intended to reduce output to ease a global glut only in case of similar actions from every other OPEC and non-OPEC producer. It is currently the second year that Riyadh is struggling a budget deficit after a record gap of $98 billion last year, and a stagnating economy.

Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year. The Saudi and Iranian economies depend heavily on oil but taking into consideration a post-sanctions environment, Iran is suffering less pressure from the halving in crude prices since 2014.  The International Monetary Fund estimates that Iranian economy could expand by almost 4 percent this year.

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