O&G stocks buoyant after Saudi, Russia agree to extend output cuts

The Saudi-Russia announcement on Monday will probably extend a price rebound that began last week, though the rally is "modest" compared to the increase when OPEC cuts were first agreed to late past year, Goldman Sachs analysts said in a report.

Extending the curbs at already agreed-upon volumes is needed to reach the goal of reducing global inventories to the 5-year average, the energy ministers of the world's biggest oil producers said in a joint press conference.

Benchmark futures prices for USA crude rose 3.2% on the news to trade at $49.41 a barrel by 0800 Eastern Time, while shares in big shale oil and gas companies such as and Whiting Petroleum were also higher.

Saudi Arabia and Russian Federation, leading a push by 24 nations to reduce the oil glut, proposed on Monday that producers should extend their supply curbs when they meet on May 25 in Vienna.

Brent for July settlement gained 15 cents to $51.97 a barrel on the London-based ICE Futures Europe exchange.

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. Sloup says it could surpass that if buoyed by higher prices. "Saudi Arabia seems very determined to push oil prices higher by making this joint statement now", said Mr Oystein Berentsen, managing director of oil trading company Strong Petroleum.

Russian President Vladimir Putin said extending output cuts for a further nine months was the right thing to do: "We support the proposal".

"We believe the industry is more focused on robust activity at stable oil prices, rather than very high oil prices at this juncture, which is not sustainable over the long run", said its analyst Mabel Tan. This fluctuation had resulted in the rise of 2.5 percent in the stock price of the crude oil in the commodity market.

More countries have been invited to the meeting of OPEC and its partners to be held May 24-25, according to Novak. Still, an increase in Libyan output, together with a surge in US production and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries' strategy to re-balance the market.

The deliberations come as two OPEC members exempt from the cuts boost output. Even extending the cuts into the first quarter of next year may not be enough to rebalance supply and demand.

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