Oil prices shed earlier gains this evening after rallying more than five per cent during the day, as markets digested a landmark pact between oil producing countries and cartel Opec.
Global benchmark Brent crude briefly rose above $57 a barrel for the first time since July 2015 in morning trading. This evening it was trading up a more modest 2.87 per cent, or $1.56, to $55.89 a barrel.
US benchmark West Texas Intermediate (WTI) slid from a high of 5.2 per cent to trade up three per cent, or $1.55, to $53.05.
On Saturday, the Organisation of the Petroleum Exporting Countries (Opec) agreed a deal with 11 other producers to reduce production by 558,000 barrels per day (bpd) in an attempt to remedy the oversupplied global market.
The deal, which included nations such as Mexico, Kazakhstan and Russia, is the first of its kind for 15 years. Russia will take the burden of the cuts, having already agreed to reduce production by 300,000 bpd.
The latest agreement adds to the 1.2m barrels per day (bpd) curb agreed by the 13 members of Opec at the end of November.
Analysts at Goldman Sachs said the production cuts supported their WTI forecasts of $55 a barrel for the first half of 2017.
Analysts added full compliance by oil producers could be worth an additional $6 a barrel on $55 a barrel forecast prices.
David Morrison, senior market strategist at Spreadco, said: "Crude prices surged overnight as traders reacted to the news that a deal between OPEC/non-OPEC producers to cut output had been officially finalised.
"The move has seen both Brent and WTI contracts gap higher and, in the case of WTI, finally bust through resistance which has held since the summer. In early trade both contracts hit levels last seen in July 2015. Compliance is the next obvious hurdle as far as production cuts are concerned. But we’re unlikely to know if anyone is breaking the agreement until shipping data and other related measures are studied over the next few months."