Global Oil Supplies Inch Down In April: IEA

Oil prices hit a three-week high after the announcement, while shares of oil majors Exxon and Chevron were up 1 percent in premarket trading.

On Monday, Russian and Saudi energy ministers said in a joint statement that Moscow and Riyadh meant to propose a 9-month extension of the current Vienna agreement on oil output cuts on the existing conditions at the OPEC ministerial meeting in late May.

The Saudi-Russia announcement on Monday will probably extend a price rebound that began last week, though the rally is "modest" compared to the increase when OPEC cuts were first agreed to late previous year, Goldman Sachs analysts said in a report.

Russian Federation and Saudi Arabia, the largest of the 24 nations that agreed to a deal to cut production for six months starting in January, are reaffirming their commitment to the deal amid growing doubts about its effectiveness.

While the curbs by producers are working, "we are not where we want to be" in bringing global inventories down "gently" below the five-year average, Al-Falih said.

Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said: "The backing of a nine-month extension by Saudi Arabia and Russian Federation got the market moving higher".

Riyadh and Moscow come out strongly in favour of extending oil production caps into 2018 ahead of the measure's review on 25 May.

"Although crude traders responded positively to the news it's hard to tell if today's move was made out of strength or desperation", said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.

The agreement was the first of its kind in around eight years and spurred a 25pc rally in crude prices in the weeks that followed.

Global crude oil supply inched down by 140,000 barrels daily last month, to 96.17 million bpd, the International Energy Agency said in the latest edition of its Oil Market Report.

OPEC and 11 other exporting nations agreed last year to take 1.8 million barrels a day off the market in the first six months of this year. Nymex crude oil futures prices are challenging $50 a barrel Monday morning. He said the longer extension was needed to balance supply and demand on the global oil market.

Some market watchers now believe exporters must agree to deeper cuts, but a number of analysts say that is not likely.

USA production is now forecast to rise to about 9.31-million barrels per day this year, and Sloup says it could surpass that if buoyed by higher prices.

  • Zachary Reyes