Oil prices jumped over 2 percent on Monday, after Saudi Arabian and Russian oil ministers confirmed their intention to extend supply cuts into 2018.
The two countries agreed that current cuts should be prolonged for at least another nine months, taking it to March 2018. This signifies a longer period than originally agreed.
Oil prices rose on the news, after sinking last week on fears that the supply cuts would not be extended. The cuts were agreed by OPEC in November of last year and represented the first agreement of its kind in eight years, in an attempt to curb the oil rout caused by excessive oversupply.
“There has been a marked reduction to the inventories, but we’re not where we want to be in reaching the five-year average,” Saudi Energy Minister Khalid al-Falih told a briefing in Beijing alongside his Russian counterpart Alexander Novak.
“We’ve come to the conclusion that the agreement needs to be extended.”
WTI Crude is currently trading up 3.03 percent at $49.29 per barrel, with Brent Crude up 2.93 percent at $52.33 (1126GMT).
“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, commodities analyst at Hyundai Futures, told The Independent.
“However, we’ll see whether the rebound remains until the US market opens. It could be short-lived and may not be able to boost prices anywhere above $60 or $70.”