Oil prices climbed to a 17-month high Monday after Saudi Arabia hinted it was willing to cut oil output more than previously indicated and Russia threw its support behind an OPEC reduction, aligning OPEC and major non-OPEC producers for the first time in 15 years.

West Texas Intermediate futures for deliver in January traded at $54.05 up $2.55 or 4.95%, while Europe's benchmark Brent crude futures for delivery in February climbed to $56.89, up $2.56 or 4.7%.

Russia said Saturday it will reduce output by 300,000 barrels a day over the first half of 2017 with the cuts due to be phased in from the start of January. A further 258,000 barrels of production will be by eleven other non-OPEC countries including Oman, Mexico and Kazakhstan, though much of that reduction will come from a well-forecast natural decline in output from depleted wells.

The deal follows OPEC's agreement at the end of November to reduce output by 1.2 million barrels per day over the first half of 2017. The bulk of those cuts, about 40%, will be shouldered by Saudi Arabia, which on the weekend said it is willing to reduce its own output beyond its agreed quota of about 10 million barrels a day.

"This comment comforts us in our view that Saudi Arabia has a strong economic and fiscal incentive to cut production to achieve a normalization of inventories, even if it requires a larger unilateral cut," noted Goldman Sachs analysts including Damian Courvalin and Jeffrey Currie. "Such a comment is consistent with our analysis of Saudi's energy fiscal revenues in 1H17, which showed that Saudi should be willing to achieve an even greater cut than the one initially proposed to offset a lack of compliance elsewhere, as a cut as large as 1.1 mb/d would still increase its fiscal revenues while normalizing inventories."

The agreement between OPEC and the non-OPEC producers followed a meeting on Saturday in Vienna, which despite the headline figures largely failed to live up to its billing. OPEC had declared ahead of the meeting that it expected non-OPEC countries to come up with 600,000 barrels per day of production cuts. The actual figure is likely to be well below that.   

Russia's decision to stagger its cuts over the course of the first half of 2017 meant that its total reduction is likely to be only 200,000 barrels per day on average over the six months, said Goldman. Other Non-OPEC countries included as signatories to the deal were expected to cut just 140,000 from their production with the remaining 118,000 barrels per day coming from natural decline as older wells begin to run dry.

Expectation that Russia will deliver on its quota will be further tempered by the fact that its cuts will be voluntary, leaving individual producers to ultimately determine their output. On the flip-side the reduction appears to have strong support from Moscow, with the Russian oil minister Alexander Novak declaring that President Vladimir Putin had taken a role in negotiating the deal.

Goldman said it expects oil prices to average about $55 a barrel over the first half of 2017, with futures prices likely to trend slightly higher as traders continue to predict a tightening market in the second half of the year.

Analysts have noted that prices above $55 would likely trigger a significant increase in output by U.S. shale gas producers.