Energy stocks soared on Monday as oil prices surged to their highest level since mid-2015 following an agreement from non-OEPC countries to cut crude production.
Global benchmark Brent crude oil was up by more than 3.8% to $56.41, while West Texas Intermediate for January 2017 delivery jumped by 4.2% to $53.65 at 9:30 a.m. ET.
Meanwhile, integrated oil majors ConocoPhillips (COP - Get Report) and Royal Dutch Shell (RDS.A - Get Report) jumped by 4.1% and 2.8%, respectively. Offshore drilling company Transocean (RIG - Get Report) and petroleum and natural gas exploration and production company Marathon Oil (MRO - Get Report) shares were both up by more than 4%. Even distressed energy stock Chesapeake Energy (CHK - Get Report) -- member of Real Money's Stressed Out Index -- was up by more than 5% during the trading session.
Shares of ExxonMobil (XOM - Get Report) were also rising by more than 2% as oil prices jumped. Additionally, news that the oil giant's CEO, Rex Tillerson, is reported to have been selected as secretary of state in President-elect Donald's Trump cabinet boosted XOM shares.
Oil prices spiked after 11 non-OPEC producers, including Russia and Mexico, finalized an agreement to reduce oil output by 558,000 barrels a day. Russia said on Saturday that it will curb production by 300,000 barrels a day over the first half of 2017. The deal follows OPEC's agreement at the end of December to cut production by 1.2 million barrels a day, effective Jan. 1, 2017. The jump is oil prices was further bolstered by comments from OPEC's leading producer, Saudi Arabia, as it hinted over the weekend that it was willing to cut oil output more than previously indicated.
"Crude is strongly up this morning based on the agreement and comments by Saudi Arabia noting that they would be prepared to cut further, if required," analysts with Stifel Nicholaus wrote in a note Monday. "They may also cut to below 10 million barrels a day."
Analysts with Coker Palmer Institutional say that with production cuts across approximately 60% of world oil production starting as soon as January, crude commodity markets are "poised to 'breakout' to a new, $52 to $62 (or higher) level."
TheStreet's Jim Cramer, however, notes that oil simply going higher on cutbacks is a "sign of pure inflation" in a market that's not used to having any inflation.
"Any increase in oil has been viewed as a sign that the world is getting better," Cramer wrote Monday. "But this is a sign of nothing more than Cartel discipline, which, historically, is not good for the markets."