The Organisation of Petroleum Exporting Countries or OPEC has approved the cutting of oil output, thereby increasing the prices of oil to a significant level.

This is the first time since 2008 when the international oil producing body increased the price of oil. Australian motorists have been alarmed as soon as they came to know that oil prices might increase by up to 10 cents per liter in the coming weeks.

How has OPEC’s approval affected the Aussie share market?

As soon as the approval of OPEC to the increase in oil prices reached the Australian share market, it started witnessing a positive flow. S&P/ASX 200 index marked a 0.7 percent surge in the prices within the first hour of the trade deal. The energy stocks of the benchmark prompted instant gains. In addition to the energy sector, mining and financial industries also saw an increase in share value after the agreement.

“We have had pretty good economic data out of the US. But the biggest moves have come from the oil sector,” Phillip Capital’s senior client adviser Michael Heffernan said. “It has had positive effect not only on sector stocks but also on sentiment,” he added, referring to the deal by the Organisation of Petroleum Exporting Countries.

How would the OPEC agreement work?

The agreement has come following the report revelation on Tuesday where oil prices moved to a two-week low because of the traders that doubted the process of negotiation on the oil production cut. According to the OPEC deal signed on Thursday, oil producers seemed ready to limit crude oil output and agreed to keep to a maximum limit of 32.5 million barrels a day.

AAP reported that the new limitation will be implemented for six months to balance the global supply of the fuel. The overloading of oil products has been evident for two years. As a result of this, the value of the crude oil barrel kept declining gradually.

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