Oil prices soar as KSA, Russia back extension of output cut

West Texas Intermediate for June delivery climbed as much as 86 cents to $48.70 a barrel before trading at $48.58 on the New York Mercantile Exchange at 1:54 p.m.in Hong Kong.

Russian President Vladimir Putin said Monday in Beijing he was optimistic about the prospect of measures to maintain "stable and fair oil prices".

But it isn't clear that these cuts will be able to reduce the glut of oil that precipitated crude's price collapse.

World oil prices leapt after the Saudi-Russian announcement and made further gains on Tuesday in Asian trade, with benchmark West Texas Intermediate up 19 cents at Dollars 49.04 per barrel.

Russian Federation and Saudi Arabia are going to hold consultations with the parties to the deal before May 24, according to the joint statement of the two countries.

The price for July futures of Brent crude oil has increased by 2.44 percent to $52.08 per barrel as of 09:23 (GMT +4).

The agency trimmed its estimate for first-half global demand growth by 115,000 barrels a day, citing weaker consumption in "previously solid countries" like India and the US, yet kept the full-year growth forecast steady.

"[But] compliance needs to remain high, and long-term oil prices need to remain low to prevent shale producers from ramping up investment significantly more".

The Organization of the Petroleum Exporting Countries, Russia and other producers originally agreed to cut output by 1.8 million barrels per day in the first half of 2017, with a possible six-month extension. The following month, 11 non-OPEC oil-producing countries pledged to cut another 558,000 barrels a day, bringing the overall reduction to 1.8 million barrels a day.

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 largest of the 24 producers that agreed to a deal to cut supply for six months starting in January are reaffirming their commitment to the agreement amid growing doubts over its effectiveness so far. Oil has surrendered most of its gains since their deal late a year ago.

"We are sceptical about Russia's willingness to actively participate in any extended cuts".

Meanwhile, two OPEC members that were exempt from reducing output because of internal strife are boosting supplies. United States oil production has risen by 10% over the previous year.

  • Zachary Reyes