Oil prices up 2% after deal to extend supply cut

Oil prices rise as Saudi and Russia agree to prolong output curbs

And on Tuesday, Kuwait said it "gives its full backing and support to. extend the oil output cuts deal between OPEC and other producers until March 2018".

Reuters picSINGAPORE, May 16 ― Oil prices rose today, extending gains after a joint announcement by top producers Saudi Arabia and Russian Federation to push for an extension of supply cuts until the end of March 2018 gained traction.

Longer cuts at already agreed-upon volumes are needed to reduce global inventories to the five-year average, the energy ministers of the world's biggest crude producers said at a joint press briefing in Beijing yesterday.

The worldwide benchmark for crude oil was up $1.35, of 2.7 percent on the day, at $52.19 a barrel on the news.

Under the current agreement that started on January 1, the Organization of the Petroleum Exporting Countries (OPEC), and other producers including Russian Federation pledged to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year.

It seems likely that the current deal amongst Opec nations and some other key oil producing nations will be extended.

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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Still, global oil supply and demand almost realigned in the first quarter after a almost three-year oversupply, and the oil stuck in storage tanks around the world shrank by 1 million barrels a day in March, the IEA said.

Analysts are expecting Opec to extend the agreement for another six months when the cartel meets later this month, and there appears to be a consensus emerging among nations involved in the original pact to extend the agreement beyond June, according to Saudi Arabia's Opec governor, Adeeb Al-Aama.

The fall in production from Iraq could support crude oil (ERY) (ERX) (PXI) (UCO) prices.

The US has also refused to cut production and its own output has increased by about 10% since a year ago.

Gold prices are trading modestly higher in pre-U.S. session trading.

"Low oil prices may bring satisfaction for some consuming countries in the short run, but in the long term as a result of reduced investment in new oil production, they could end up paying a much higher price for a barrel of oil", he said. "Year-to-date compliance with production cuts remained robust at 96 percent", said the report.

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