By Timothy Puko and Alison Sider

Oil prices surged more than 9% Wednesday. as investors hoped a deal clinched by major oil-producing nations would help oil prices break out from a punishing slump that has lasted more than two years.

After weeks of doubt that members of the Organization of the Petroleum Exporting Countries could resolve their differences, the agreement in Vienna on Wednesday seemed to surprise many investors. The percentage gains were the biggest for U.S. and international crude prices since February, jolting a market toward the top of a range where it has been stuck for several months.

The Brent global benchmark broke above $50 a barrel for the first time in a month, while U.S. crude futures rose 9.3% to $49.44.

Some investors remain skeptical that the deal will bring a meaningful supply reduction to a world awash in oil. But many market observers have been predicting that oil supply and demand will come into balance next year even if major producers kept pumping at these high levels. Now, some investors say the OPEC deal will likely accelerate that process.

"This is going to be the event that signals the recovery," said Dan Pickering, who oversees $1.9 billion in investments for the asset-management arm of Tudor, Pickering, Holt & Co. in Houston.

OPEC members agreed to cut production by 1.2 million barrels a day from the current 33.6 million barrels, which would erase about 1% of global output. OPEC also expects producers from outside the cartel, including Russia, to join with additional cuts totaling 600,000 barrels a day.

There are other recent signs that supply may be coming down. The U.S. Energy Information Administration reported Wednesday that domestic stockpiles shrank by 884,000 barrels last week, ending a three-week string of additions that included the biggest weekly U.S. crude surplus on record.

U.S. crude production is down 9.5% from last year's peak even with a recent uptick. Major global companies have cut investment by $125 billion annually, Mr. Pickering said.

Energy Aspects, a London-based consultancy, said the deal could keep prices steadily above $60 a barrel by the first quarter of 2017.

That would only get prices back to roughly half their levels in 2014, and other investors weren't as bullish. Global oil stockpiles have swelled to near records, and those inventories will continue to weigh on markets, which are still feeling the effect of the shale drilling and oil-sands production in North America that helped create the glut, some said. "You're starting from a very oversupplied market," said Sarah Emerson, a principal at ESAI Energy LLC in Boston. "You're going to chip away at some of that inventory surplus but you're not going to chip away at everything,"

Despite Wednesday's gains, many traders say they are skeptical that the six-month agreement will be extended 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, some money managers said.

If the agreement isn't continued, 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.

"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."

U.S. producers are the biggest threat to the deal, according to Jason Bordoff, director of Columbia University's Center on Global Energy Policy. He said U.S. shale drilling could rise 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. Some U.S. producers have cut costs and can get by producing at prices even below $50 a barrel.

OPEC's action, he added, "may well prove to underestimate U.S. shale."

The deal represents a reversal from 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 they 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 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 failing to act earlier this year, analysts said. It also ended speculation about whether OPEC could agree to work together after nine months of on-and-off-again negotiations.

"It's a strong move, I think it should be respected," said Vincent Elbhar, managing partner of GZC Investment Management in Switzerland, though he added "I feel it's kicking the can a bit."

--Sarah McFarlane and Benoit Faucon contributed to this article.

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

(END) Dow Jones Newswires

November 30, 2016 18:04 ET (23:04 GMT)

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