Oil soared Monday following a landmark deal by Russia and other non-OPEC producers to join the cartel in capping output, in a bid to end a stubborn global glut that has hammered prices.
In a bid to reverse a dramatic fall in income, Russia and 10 other non-OPEC states on Saturday said they will reduce their production by more than half a million barrels per day (bpd), the Organisation of the Petroleum Exporting Countries announced.
The move marks the first time non-OPEC members have reached an agreement since 2001, and follows a similar agreement by OPEC last month.
OPEC members had agreed to collectively reduce output by 1.2 million bpd beginning in January.
At about 0200 GMT, US benchmark West Texas Intermediate for January was up $2.28 at $53.78 while Brent crude was up $2.29 at $56.62.
“OPEC and non-OPEC’s signing of the production cut agreement over the weekend was clearly the catalyst, overlooking Saudi Arabia’s record high production in November,” said OANDA senior analyst Jeffrey Halley.
OPEC kingpin Saudi Arabia also announced at the weekend that it will slash production beyond what was previously agreed in Vienna by OPEC, providing an additional boost for prices.
“The country is also preparing a partial flotation of its crown jewel in 2018, the state-owned oil company Saudi Aramco, and that certainly serves as an incentive for the oil giant,” said IG market strategist Jingyi Pan.
Pan noted prices have hit their highest since February 2015 and any concerns about compliance have been put on a back burner.
Despite the spike, oil prices remain at about half their mid-2014 levels.