London/Seoul: Oil traded near $50 and crude producers rose after Opec approved its first supply cuts in eight years, with the focus now shifting to how strictly the group will implement the deal.

Futures advanced 0.5% in New York after rising 1.6% earlier. Prices surged 9.3% on Wednesday, the largest gain since February amid record volumes. Opec agreed to reduce collective production to 32.5 million barrels a day, prompting predictions of a possible crude rally to $60 a barrel from Goldman Sachs Group Inc. and Morgan Stanley.

Opec’s three largest producers—Saudi Arabia, Iraq and Iran—overcame disagreements to reach Wednesday’s landmark deal in a bid to drain record global inventories and bolster the price of crude. After hailing the breakthrough agreement, analysts highlighted the need for Opec to comply.

“Opec’s adherence to the agreement will be critical, and its track record is poor—but for the time being oil prices have received a huge support," Jason Gammel, an analyst at Jefferies Group Llc, said in a note. “The group demonstrated more cohesiveness than at any point" since cutting in 2008, he said.

West Texas Intermediate for January delivery rose as much as 80 cents to $50.24 a barrel on the New York Mercantile Exchange and traded up 45 cents at $49.84 as of 12:11 pm London time. The contract jumped $4.21 to close at $49.44 on Wednesday. Total volume traded was more than double the 100-day average.

Brent for February settlement climbed 1.2% to $52.45 a barrel on the London-based ICE Futures Europe exchange, trading at a $1.67 premium to WTI for the same month. The January Brent contract surged 8.8% to expire at $50.47 a barrel on Wednesday.

Cuts breakdown

Saudi Arabia, which raised oil production to a record this year, will reduce output by 486,000 barrels a day to 10.058 million a day, an Opec document shows. Iraq, the group’s second-largest producer, agreed to cut by 210,000 barrels a day from October levels. Iran is the only member allowed to raise production, after claiming special consideration following years of sanctions. Non-member Russia agreed to curtail output by as much as 300,000 barrels a day.

Russia, the biggest producer outside Opec, will cut output from the current level of 11.2 million barrels a day, energy minister Alexander Novak said Thursday. Production will decrease gradually in the first half of next year, he said.

“After yesterday’s boost, today everyone will return to calculate the real impact of the cuts on supply and demand," said Olivier Jakob, managing director of Zug, Switzerland-based consultants Petromatrix GmbH. “Opec’s target is to have prices in the $55-to-$60 range."

Goldman Sachs forecast an increase in prices to $55 for WTI and $56.50 for Brent, saying full compliance with output targets by Opec and non-members could add an extra $6 a barrel. If the group sticks to its commitments, oil may trade from $50 to $60, Morgan Stanley said.

Oil companies were among the biggest winners on the UK’s FTSE 100 Index, with BP Plc rising as much as 4.2% and Royal Dutch Shell Plc adding as much as 3.2%. Bloomberg

My Reads Logout