Asian stocks climbed to a fresh-two year high on Tuesday on the back of an overnight rise in Wall Street, while oil extended gains after major producers Saudi Arabia and Russian Federation pledged to push for an extension of supply cuts into 2018.
In a joint statement Opec's de facto leader Saudi Arabia and Russian Federation, the world's second largest oil producer, said they had come to the conclusion that the agreement needs to be extended. He said "rising U.S. production and record inventories have kept upside limited and a nine-month extension at this stage is unlikely to break that".
On the news, Brent crude rose 2.3% to $52.04 a barrel while West Texas Intermediate (WTI) climbed 2.6% to $49.09.
Brent for July settlement added as much as 85 cents, or 1.7 percent, to $51.69 a barrel on the London-based ICE Futures Europe exchange.
Although the actual meeting for OPEC and NOPEC isn't scheduled until May 25th, the timing of this announcement from the largest producer and the largest exporter (25% of global production between them), was a complete surprise and probably a testament to two things.
In a joint statement to journalists on Monday, Khalid al-Falih, Saudi's energy minister and Alexander Novak, said they would do whatever it took to curb oversupply.
The current agreement that started on 1 January effectively cut oil production by Opec and non-Opec countries by nearly 1.8 million barrels per day (bpd), but that has not helped crude futures move above the $50 per barrel levels.
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Shale producer Pioneer Natural Resources (PXD) said recently its break-even oil price is just $20 a barrel, and the company could make "good returns" at $40 dollar oil.
But Phil Flynn, senior market analyst at Price Futures Group, was upbeat on the prospect of an extension and thinks oil prices will hit $73 a barrel by the end of the year.
As OPEC and its allies curb supply, production in the US, which is not part of the agreement, has risen to the highest level since August 2015 as drillers pump more from shale fields.
USA production is now forecast to average about 9.31 million bpd this year - a level reached already, according to government figures. Oil has surrendered about half its gains since the producers' accord to cut output late past year. Nymex crude oil prices have rallied around $6.00 a barrel from the May low.
"We never say that our goal is a price".
After the price of oil started to plunge three years ago, Opec - in particular Saudi Arabia - stood by, hoping the financial pressure on U.S. shale would force it to cut back.
"We believe that the market won't be able to balance by the year-end", he said.