The price of oil rose more than 2 percent on Monday’s session following the decision of Russia and Saudi Arabia on extending the output reduction until March 2018. This is considered a step towards OPEC lengthening their deal to support prices.
International benchmark Brent crude edged up by 1.9 percent or 95 cents to trade at $51.79 per barrel, while U.S. crude rose as much as 2.1 percent or $1.01 to trade at $48.85 per barrel.
Russia and Saudi Arabia ministers, two of the world’s major oil producers, noted that the reduction on supplies could be extended for nine months until March 2018, much longer than OPEC’s suggested deal of six months. Traders of this commodity were shocked by the announcement; however it continues to be examined whether participating countries would agree with the output deal of Russia and Saudi Arabia.
Few analysts are skeptic if producers would put up with the extended curb. Meanwhile some analysts suggested that the production in the United Sates could possibly interrupt the stability of the market, not unless the reductions were expanded.
Oil may have gotten support from the deal, but stockpiles are still high and production from other nations such as U.S. is increasing, which makes prices below $60. Energy services firm Baker Hughes Inc. said last Friday that energy firms from the country added oil rigs for 17 weeks straight.
The price of oil was marginally trimmed down on Monday’s session following the report of the U.S. Department of Energy that production from U.S. shale basins would be higher by 122,000 barrels per day next month. Russia, OPEC, along with non-members has agreed to reduce production by 1.8 million barrels per day from January to June this year.