Oil recorded a remarkable increase of 6.5 percent on Monday to an 18-month high after OPEC and some of its rivals reached their first deal since 2001 to jointly reduce output to try to tackle global oversupply and boost prices.
Futures for Brent crude were up $2.21 at $56.54 per barrel, having hit a session peak of $57.89, the highest since mid-2015. U.S. crude futures were up $2.16 at $53.66 a barrel.
The price is 50 percent higher than at this time last year, marking the largest year-on-year rise on any given day since September 2011.
“OPEC have taken a very important step towards stopping the relentless build up in global stock levels and speeding up the rebalancing process, as long as compliance is strong, Libya and Nigeria fail to rebound and U.S. producers take time to respond,” PVM Oil Associates strategist David Hufton said.
On Saturday, producers from outside OPEC, led by Russia, agreed to reduce output by 558,000 bpd, short of the target of 600,000 bpd but still the largest contribution by non-OPEC ever.
Saudi Energy Minister Khalid Al-Falih said Saturday the biggest crude exporter will “cut substantially to be below” the target agreed last month with members of OPEC. His comments followed a deal by eleven non-OPEC countries including Mexico to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years.
But for the deal to be effective, all parties must stick to their word, analysts said.
Goldman Sachs forecast full compliance would be worth an extra $6 per barrel to its price forecast.