The oil producers' cartel Opec has approved plans to cut crude output by 1.2 million barrels per day.
Opec supplies a third of the world's oil
The cut, agreed at a meeting in Qatar, sets production at 26.3 million barrels per day from 1 November.
It is the first time the 11-nation organisation has agreed on a group-wide production cut in more than two years.
Opec is trying to shore up global crude prices, which have fallen 20% since they hit record highs of $78 a barrel during the conflict in Lebanon in July.
Both US light crude and Brent were trading below $60 a barrel on Thursday.
The reduction will affect all member nations except Iraq, officials said.
Crude prices have been extremely volatile this year as geopolitical tensions and production problems have impacted on the market.
Analysts have said they do not expect oil prices to surge back near record levels in the near future, as more oil production is coming on-line.
However, the analysts have been careful to qualify their comments, warning that many of the main oil producing nations are in unstable regions and any problems could lead to a large price spike.
They also said there may be further production cuts later this year.
Opec is next due to meet in December in Abuja, Nigeria.
Venezuelan Energy and Mines Minister Rafael Ramirez said a further cut of 500,000 barrels might be necessary then, Reuters news agency reported.
Similarly Qatar's Energy Minister Abdullah bin Hamid Al-Attiyah did not rule out further cuts.
"Everything is possible," the Associated Press news agency quoted him as saying. "We are working with the market and it is an open market."