By Nicole Friedman 

Oil prices surged 5.3%, their biggest gain in more than five months, after the Organization of the Petroleum Exporting Countries signaled it could agree to limit production in November.

News of a possible breakthrough among OPEC members after months of false starts caught many traders by surprise. But some analysts are questioning how much an OPEC agreement would reduce the global supply glut.

U.S. crude for November delivery settled up $2.38 at $47.05 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $2.72, or 5.9%, to $48.69 a barrel on ICE Futures Europe. The oil rally gave some support to U.S. stocks, with energy shares up 4.3% and the S&P 500 up 0.5% to 2171.37.

OPEC members agreed at a meeting Wednesday in Algeria that a production cut is needed to lift oil prices, but the group will wait until November to finalize a plan.

"It's telling you that there's enough pain out there where you're starting to get some reaction from producers," said Bill O'Grady, chief market strategist at Confluence Investment Management. "It makes me more friendly toward the market."

The cartel hasn't taken action to freeze or cut its production since oil prices started falling in mid-2014. Talks in April fell apart when Iran refused to participate.

But many analysts are skeptical OPEC members would comply with production cuts. They compete for market share against each other, and against U.S. and other producers. OPEC members Iran, Libya and Nigeria have said they want to increase their output.

Saudi Arabia, OPEC's biggest producer, typically pumps more oil in the summer to meet domestic demand and less in the winter. OPEC officials could be referring to the expected seasonal decline in Saudi production when they talk about an output cut, analysts say.

"There's so many holes that you could poke in this," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. "My reaction is, I'll believe it when I see it."

Write to Nicole Friedman at nicole.friedman@wsj.com

 

(END) Dow Jones Newswires

September 28, 2016 18:27 ET (22:27 GMT)

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