Global oil prices surged on Monday after oil ministers from Saudi Arabia and Russia said they would agree to extend OPEC's current production cuts for a further nine months in order to re-balance markets.
Speaking in Beijing earlier Monday, Saudi Arabia's Energy Minister, Khalid al-Falih and Russia's Alexander Novak said they wanted the current pact, which involves OPEC member and non-member states, including Russia, to continue holding back around 1.8 million barrels of oil from the market each day until the first quarter of 2018. The current agreement, established last November, is set to expire at the end of next month.
"The two ministers agreed to do whatever it takes to achieve the desired goal of stabilizing the market and reducing commercial oil inventories to their 5-year average level," the ministers said in a joint statement said. "as well as to underscore the determination of oil producers to ensure market stability."
WTI futures for June delivery were marked 2.17% higher at $489.22 per barrel by 12:45 BST while Brent contracts for the same month, the global benchmark, were seen 1.92% higher at $51.83 per barrel.
The statement, which comes 10 days before OPEC ministers are set to meet in Vienna to formally discuss the production pact, will likely put more pressure on U.S. suppliers in order to keep prices from escalating beyond their current levels.
Last week, Houston-based oil field services group Baker Hughes (BHI said U.S. producers added 8 new oil rigs to the U.S. output cycle, taking the overall total to 885 units.
In total, the U.S. land rig count is now up 479 rigs from a year ago when it stood at 406, Baker Hughes data indicates. Oil rigs are up 394 in the past year, while natural gas rigs have risen by 85 and miscellaneous rigs are level.
The Permian Basin of West Texas and New Mexico was the largest beneficiary of new drilling activity over the week, adding eight rigs alone. Oklahoma's Cana Woodford Basin saw a modest two-rig uptick.