Oil prices surged with crude futures in New York rising above $50 per barrel for the first time in around a year as Opec+ agreed to rollover production cuts, backed by a one million barrel per day commitment from Saudi Arabia.
Brent, the international marker, surged by 5.32 per cent to $53.81 per barrel at 11.26pm UAE time. West Texas Intermediate was up 5.29 per cent to reach $50.14 per barrel.
The group's agreement to maintain the current level of curbs of 7.2 million barrels per day until the end of March, rallied markets, which had swung on Monday due to uncertainty over policy direction.
"We are the guardian of this industry and because of that, Saudi Arabia is willing to volunteer cuts for the two months of February, and also for the month of March, [of] one million bpd," Prince Abdulaziz bin Salman, Saudi Arabia's energy minister, told reporters at the end of a two-day long ministerial meeting.
The world's largest exporter will see its production pared back to 8.119m bpd for the next two months. Saudi Arabia will expect "a collective effort" to cut, if demand doesn't recover in the first quarter, Prince Abdulaziz said, when asked if the kingdom was willing to extend its voluntary commitments for longer. The gesture, which he said was one of goodwill, will offset increases from Russia and Kazakhstan.
"The return of stricter lockdown measures and growing uncertainties have resulted in a more fragile economic recovery that is expected to carry over into 2021," Opec+ said in a communique on Tuesday, following a meeting that lasted two days.
The producer alliance noted the recent buoyancy in the markets, but advised caution due to "prevailing weak demand, poor refining margins, high stock overhang and other underlying uncertainties".
Russia and Kazakhstan pushed for an increase in output of 500,000 bpd. The move was rejected by other members of the alliance. Moscow and the former Soviet state will add a total of 75,000 bpd of supply to the markets in February and March.
Opec+ had previously planned to bring 2m bpd of supply back to the markets from the beginning of 2021. The group deferred the increase at their annual meeting last month, taking into account lockdowns imposed across a number of developed nations.
Opec+ chose to tread carefully amid the spread of a new strain of Covid-19 in the UK and South Africa, which have been found to have higher rates of transmissibility. Global cases of Covid-19 are above 86.5 million, with big oil demand centres such as the US, India, Brazil, Russia and the UK ranking among the worst affected by the spread.
The group has been urging producers not to cash in on the recent surge in oil prices following optimism over the potenital containment of the Covid-19 pandemic due to the rollout of vaccination programmes in several countries.
The "hands-on-approach" the markets are now accustomed to seeing from Opec+ is largely behind the "bullish kick" seen in oil prices through the last quarter, JBC Energy said in a statement.
Maintaining cuts at 1.5m bpd higher than expected for February would help push the global crude balance below five-year average levels, the consultancy added.