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

Goldman Sachs analysts say the Russia-Saudi announcement bodes well for agreement from OPEC, "consistent with OPEC's desire to achieve both price stability and backwardation, which will help to slow the recovery in shale oil production by curtailing the market's ability to grow future production through forward sales".

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.

The U.S. West Texas Intermediate crude June contract ticked up 27 cents, or around 0.6%, to $49.12 a barrel by 8:55AM ET (12:55GMT).

Global benchmark Brent crude settled up 98 cents, or 1.9 percent, at $51.82 a barrel, having touched $52.63, the highest since April 21.

Oil prices extended gains on Tuesday after top producers Saudi Arabia, Russia and Kuwait supported prolonging supply cuts until the end of March 2018 in an effort to drain a global glut.

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In the first quarter of 2017, "the oil market was nearly balanced", the International Energy Agency said in its latest monthly report.

"With the United States rig count increasing for its 17th consecutive week, I think we can safely say that the crude oil battle is well and truly on", said Mr Matt Stanley, a fuel broker at Freight Investor Services in Dubai.

News of the joint deal sent crude prices up more than 1.5 percent in Asian trading. The ministers will consult with other oil-producing countries with "the goal of reaching full consensus on the 9-month extension" they are seeking, the statement said. Oil has surrendered about half its gains since the producers' accord to cut output late past year.

However, there is no final deal yet despite the pledge by Saudi Arabia - the world's top exporter and de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC) - and top producer Russian Federation, as the 12 remaining OPEC members and other producers participating in the cuts have to agree to the extension during a meeting on May 25. U.S. oil production has risen by 10% over the previous year.

Another 3-5 countries might join the agreement on reducing oil production by OPEC countries and non-cartel exporter countries, he went on.

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