Oil price lifts on prospect of deal between OPEC ministers

Oil prices have jumped 8% as OPEC ministers appear to close in on a deal to limit production.

The cost of a barrel of Brent crude climbed above $50 as members of the cartel met in the Austrian capital Vienna.

One source told Reuters that a limit on oil output had been agreed but others said that talks were continuing on the size of each country's cut.

UK-based oil giant Shell (LSE: RDSB.L - news) saw shares rise 5% while BP was up 4%.

A glut of supply on world markets amid slowing demand for energy has put the oil price under severe pressure and it is now less than half its level in mid-2014.

Members of the Saudi-dominated Organisation of Petroleum Exporting Countries have so far been unable to finalise any agreement on reducing production in order to help the price recover.

But Saudi energy minister Khalid al-Falih said there was now an "optimistic" mood about a deal being reached at the Vienna meeting.

He said the kingdom was prepared to accept a "big hit" to its own production and to agree that rival Iran could freeze output at the same levels they had been since before sanctions were imposed.

His remarks were seen as a compromise after Riyadh had in recent weeks insisted that Iran should fully participate in any production cut.

The 14-country OPEC group accounts for a third of global oil production.

A preliminary agreement reached in Algiers in September exempted Iran, Libya and Nigeria from cuts as they have been hit by unrest and sanctions.

IG (Frankfurt: A0EARV - news) market analyst Joshua Mahony said: "Despite differing views emerging from Vienna, one recurring theme is that OPEC members are very close to agreeing a deal to curb output, with concessions for the likes of Iran raising the possibility of a deal that manages to please most members."

Low oil prices mean cheap petrol for UK motorists, giving a boost to consumer spending.

But the crisis in the industry has hammered the North Sea oil and gas sector, costing thousands of jobs.

A tough outlook for BP and Shell also has implications for UK pension funds with investments in the oil giants.

Low oil prices can also deter investment in new exploration and drilling, prompting a warning earlier this month from the International Energy Agency on the risk of a "boom/bust" cycle as shrinking supplies push prices back up.

An industry report this week showed 67% of oil and gas firms had cut jobs this year, with more losses expected over the next 12 months.