Oil prices rose by more than two per cent today after they were bolstered by an agreement between the Organisation of the Petroleum Exporting Countries (Opec) and non-members including Russia over production curbs yesterday.
The Opec-led coalition agreed to extend oil supply cuts through to the end of 2018, nine months past the previous expiration date of March 2018, as the group continues work to whittle down the global supply glut. The deal to cut production by 1.8m barrels per day (bpd) was originally agreed in January of this year after oil prices crashed in 2014 and failed to recover.
The price for the global benchmark, Brent crude, was trading 2.03 per cent higher this afternoon at $63.90 a barrel, having risen above $64 a barrel earlier in the day.
West Texas Intermediate, the US benchmark, traded 1.83 per cent higher at $58.45 a barrel.
"While the decision to extend production caps will likely continue to benefit oil prices, the ultimate benefactor will be the US shale producers who are able to continue increasing production in an environment of rising oil prices; grabbing market share along the way," said Joshua Mahony, market analyst at IG.
Norbert Rucker, head of macro and commodity research at Julius Baer, said: "The past months’ oil price rally gave Opec a boost of confidence but the group remains far from controlling the oil market. There have been two allies who eased the pain of dwindling cash flows for petro-nations: the global economy and financial markets.
"Looking ahead, we see the tightening of the global oil market balance slowing and partially reversing."