European equities climbed higher on Thursday, with energy shares rallying after oil prices surged overnight following a deal by OPEC members to limit crude output.
The Organization of the Petroleum Exporting Countries has reached an agreement in Algiers to cut production to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd.
The European oil and gas index soared 4.8 per cent and was poised for its best day in seven months.
“The OPEC agreement will make the return to market equilibrium in the oil market easier and faster. Oil prices going substantially above $50 a barrel could now happen in the spring of 2017,” said Ronny Claeys, senior strategist at KBC Asset Management.
“It is good news for oil companies, which can outperform over the next six months.”
However, some analysts said there was no certainty that the move would take away the oversupply in the oil market as several non-OPEC countries like Russia were pumping oil at an increased level and US shale supply could increase again.
“Nevertheless, this action will at least put a bottom under oil prices and the energy sector. Whether this will be the start of a new bull market will depend on the details of the deal,’’ said Philippe Gijsels, head of research at BNP Paribas Fortis.
The pan-European STOXX 600 was up 1 per cent by 0807 GMT, recording its third straight day of gains, also helped by stronger mining shares.
The European basic resources index rose 2.8 per cent as prices of major metals advanced. Shares in Anglo American rose 4.6 per cent, the highest since the middle of 2015, while Glencore rose 3.5 per cent to its highest level in more than one year.
However, Capita slumped 30 per cent to a four-year low and was on track for its worst one-day performance ever, after the British outsourcing group cut its full-year profit outlook, the second support services group to warn that clients were delaying decisions following Brexit.