By Alison Sider, and Timothy Puko

Crude futures surged to one-month highs after OPEC agreed to reduce its output by more than 1 million barrels a day, a cut that many market participants say could be significant enough to push oil supplies below demand levels sooner than expected.

Delegates from members of the Organization of the Petroleum Exporting Countries reached a deal in Vienna to cut production by 1.2 million barrels a day from the current 33.6 million barrels, according to people familiar with the matter. OPEC's cut would erase about 1% of global output.

Both U.S. and international oil posted their largest percentage gains since February on thenews. The Brent benchmark broke above $50 a barrel for the first time in a month.

Despite the gains, many traders say they are skeptical about whether the deal will last beyond six months and how it will be enforced. OPEC members have a history of cheating and exceeding their own production quotas, so even if the deal cuts deep and the agreement is firm, it may be months before its impact on the market, if any, becomes clear, money managers said.

OPEC's new course is a stark reversal in strategy from their last big change in November 2014, when the group essentially lifted all output quotas so its members could compete with a global boom in oil production. That decision led OPEC to record-high production, adding more supply to an already flooded market and eventually dropping prices below $30 a barrel, so low that many worried it could fuel a global recession.

Cutting back now, especially if Russia and other international rivals join OPEC, could solve one of the market's biggest problems in recent weeks, another surge in global output. OPEC and Russian production grew to new records this autumn, and U.S. production ended a long, slow decline, trends that briefly sank oil to two-month lows.

That had forced OPEC to act this time after letting another attempt fail earlier this year, analysts said. It also ended growing speculation about whether OPEC could agree to work together after nine months of on-and-off-again negotiations had so far been unable to provide any solution on how to keep oil prices near $50 a barrel.

A deal to cut more than 1 million barrels a day could keep prices steadily above $60 a barrel by the first quarter of 2017, according to London-based Energy Aspects. It would accelerate the end of a glut that has been slow to come for more than two years after the development of shale drilling and oil-sands production in North America, severalanalysts said.

U.S. crude futures gained $3.97, or 8.8%, at $48.20 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $3.83, or 8.3%, to $50.21 a barrel on London's ICE Futures Exchange.

Goldman Sachs said Tuesday that oil markets will likely shift into a deficit -- with demand outpacing new production -- by the second half of next year even if OPEC members keep pumping. Even a relatively modest cut to OPEC's output could speed that along by six months if Russia also agrees to hold its production steady, the analysts said.

The U.S. Energy Information Administration also reported Wednesday that domestic stockpiles shrank by 884,000 barrels last week, compared with analysts' expectations that they would climb by 100,000. That ends a three-week string of additions that included the biggest weekly U.S. crude surplus on record.

Production was also flat in the last week, and is down 9.5% from last year's peak even with a recent uptick. That is one sign among many that the glut may be easing, said Dan Pickering who oversees $1.9 billion in investments for the asset-management arm of Tudor, Pickering, Holt & Co. in Houston.

Major global companies have already cut investment by $125 billion annually, he said. Russia has also agreed to join OPEC and cut 300,000 barrels-a-day, according to OPEC. And even if OPEC members cheat and outproduce quotas, this deal would still likely cut their total output by 800,000 barrels a day, Mr. Pickering added.

"We're going to take a meaningful amount of supply off the market," he said. "This is going to be the event that signals the recovery."

But if the deal doesn't last longer than a few months, supply could surge again by the middle of the next year, leaving the market little changed, said Greg Sharenow, portfolio manager at Pacific Investment Management Co., which manages $1.5 trillion,including $13 billion in commodities. He will be watching Saudi Arabia's official selling prices in the coming weeks to see if they climb far enough above expectations to signal the kingdom is serious about cutting supply.

"It looks to me the headlines are overstating the real implications," Mr. Sharenow said. "This deal overall is still quite positive. But there are things that have to be thought about."

Historically it has been notoriously difficult to ensure that OPEC's members are sticking to agreed-upon production levels, and in recent months members like Iran and Iraq have insisted that they wanted to continue pumping at full tilt. In past agreements between OPEC and Russia, Russia's cutbacks have been only limited and brief, according to S&P Global Platts.

OPEC's production has ramped up recently as members jockeyed for position in negotiations. The International Energy Agency has said OPEC production rose to a record 33.8 million barrels a day in October, with countries including Iraq, Saudi Arabia, and Kuwait pumping at or near all-time highs. OPEC has said its production increased by 240,000 barrels a day in October to average 33.6 million barrels.

And OPEC isn't the only game in town. Countries outside the cartel now account for about 58% of the world's total output, and producers around the world have opened the taps in recent months. Global production rose 800,000 barrels a day in October, to 97.8 million barrels, according to the IEA. Russian oil production has increased by 500,000 barrels a day in September and October, so even if it agrees to freeze output it would do so at record high levels.

U.S. producers are the biggest threat to undermine OPEC's deal, said Jason Bordoff, director of Columbia University's Center on Global Energy Policy. He said the deal could cause inventories to drain and the glut to ease by early next year, unless output from U.S. shale drilling quickly rises to fill the gap. The U.S. rig count has increased steadily as prices stabilized in recent months, suggesting that companies could soon begin pumping more oil.

"It's an open question," Mr. Bordoff added. "OPEC action to cut production and prop up the price reflects a pessimistic view of what U.S. shale can do that may well prove to underestimate U.S. shale."

Gasoline futures recently gained 7.6% to $1.482 a gallon. Diesel futures gained 6.8% to $1.5618 a gallon.

Sarah McFarlane and Benoit Faucon contributed to this article.

Write to Alison Sider at alison.sider@wsj.com and Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

November 30, 2016 13:55 ET (18:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.