Oil has gained support from the deal but inventories remain high and rising output from other producers, such as the United States, is keeping prices below the $60 that top exporter Saudi Arabia would like. "The two ministers agreed to do whatever it takes to achieve the desired goal of stabilising the market and reducing commercial oil inventories to their five-year average level".
Global benchmark Brent increased by as much as 3.3 per cent to US$52.52 a barrel on ICE Futures Europe and West Texas Intermediate climbed by up to 3.4 per cent, to $49.45 a barrel on the New York Mercantile Exchange.
Saudi Arabia and Russian Federation agreed to extend the current 1.8 million barrels per day (bpd) crude supply cut for another nine months, which was scheduled to end next month.
Under the current agreement that started on January 1, the 13-country OPEC and other producers pledged to cut output by nearly 1.8 million barrels per day in the first half of the year.
Still, global oil supply and demand almost realigned in the first quarter after a almost three-year oversupply, and the oil stuck in storage tanks around the world shrank by 1 million barrels a day in March, the IEA said.
The aim was to reduce a glut in global oil supply that had depressed prices. This fluctuation had resulted in the rise of 2.5 percent in the stock price of the crude oil in the commodity market.
Oil traders were surprised by the strong wording of the announcement, although it remained to be seen whether all countries participating in the deal would agree with the Saudi-Russian stance.
Current Oil Minister Bijan Zanganeh, speaking on 6 May, said he believed producers were likely to extend the Opec-led deal although he did not give a timeframe, and added $55 was a suitable price for oil. Today Libyan oil output creeps higher ahead of OPEC decision on cuts.
"There are no fast solutions to end this situation, and the only solution possible is to let oil prices work their way" to clear the oversupply, Al-Husseini said from the Saudi city of Dhahran. The OPEC has already implemented its commitment while non-cartel countries have implemented over half of the agreed cuts. "These combined volumes could largely offset the benefit of the extended cuts", Goldman Sachs said, keeping its average Brent price forecast for the third quarter at $57 per barrel.