Russian Federation and Saudi Arabia Commit to Oil Cuts Through Next Year

There's still concern that a surge in USA production, together with an increase in Libyan output and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries' strategy to stabilize the market and prop up prices.

Saudi Arabia and Russian Federation agreed to extend the current 1.8 million barrels per day (bpd) crude supply cut for another nine months, which was scheduled to end next month.

The Energy Ministers of Saudi Arabia and Russian Federation said that they had "reached an understanding" that it is necessary to keep surplus crude off the market "until March 31, 2018", in order to stabilize a world oil market that is still oversupplied.

Venezuela is undergoing a wave of unrest with protesters angry at an economy in crisis, with food and medicine shortages and soaring inflation. They will present their position to other countries ahead of a meeting between OPEC and other producing nations later this month in Vienna.

WTI Crude is now trading up 3.03 percent at $49.29 per barrel, with Brent Crude up 2.93 percent at $52.33 (1126GMT). The American Petroleum Institute was scheduled to release data for last week at 4:30 p.m. EDT on Tuesday, with the U.S. Energy Information Administration report due at 10:30 a.m. EDT on Wednesday.

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.

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"We assume that the main thing is not the price, but the (intention) to bring average monthly reserves back to the average five-year level", the minister said.

"Today's announcement will likely further extend the oil price rebound started last week on decent stock draws and low positioning", said analysts at Goldman Sachs in a note.

OPEC members agreed in November to cut output by 1.2 MMbpd. Even extending the cuts into the first quarter of next year may not be enough to rebalance supply and demand.

"The ministry stressed that the agreement on oil output cuts had a positive impact on oil prices, adding that additional steps to ensure market stability in the long term were still needed as global commercial oil reserves were above their five-year average".

Immediately after the briefing, oil prices began an upward swing to a three week high, gaining almost $2 on the barrel.

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