Oil prices gained more than 1.5 percent during Monday's Asian trading session after Saudi Arabia and Russian Federation agreed to extend their crude production cuts from the original near-term end date to March 2018.
Saudi Arabia and Russia say the production cuts are working, and inventories are decreasing, Energy Minister Khalid Al-Falih, alongside his Russian counterpart, said in Beijing.
Meeting on the sidelines of China's One Belt One Road conference in Beijing, energy ministers from the two countries said supply cuts should be prolonged for a further nine months, ie, until March 2018, from June 2017 as originally scheduled, to rein in a global glut that is preventing prices from firming up.
July Brent on London's ICE Futures exchange LCON7, +2.01% gained 90 cents, or 1.8% at $51.75. For the strategy to work, however, we believe that (1) compliance needs to remain high and (2) long-term oil prices need to remain low to prevent shale producers from ramping up investment significantly more.
Nigeria, which now pumps about two million barrels of oil per day, is seeking to be exempt from the new OPEC deal, which would be considered at the next ordinary meeting in Vienna.
The ministers said they hoped other producers would join the cut, which would initially be on the same volume terms as before.
"Preliminary consultations show that everybody is committed" to the output agreement and no nation is willing to quit, Russia's Novak said.More news: Emma Watson praises genderless MTV Awards after 'Beauty' win
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OPEC began production cuts on January 1 in a bid to reduce swollen global inventories and bolster the price of oil, which is still stuck at half its 2014 level.
There were also worries over rising United States production after 16 weeks of rising drilling activity since oil prices rebounded above $50.
Libya pumped as much as 1.6 million barrels a day before an uprising in 2011, and it was exempted from OPEC's cuts due to internal strife.
OPEC is slated to meet on 25 May and the Saudi-Russia joint statement is expected to ensure cooperation from other producer exporters. Nymex crude oil prices have rallied around $6.00 a barrel from the May low.
USA stocks slipped on Friday, ending the week lower as tepid economic data weighed on banks and worries deepened over department stores. That made "the market poised for a reversal from the recent weakness on any bullish headline, which is what we're seeing today", she told CNBC in an email.
"The market is certainly reacting to comments from Saudi Arabia and Russia's ministers, and it should help at least maintain current prices", Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone.