Saudi Arabia and Russia agree nine-month oil output cut deal

Saudi Arabia and Russia agreed to a nine-month extension of the supply cuts agreed to in November 2016, issuing a strongly worded statement that sparked gains in crude oil futures.

Following their meeting in Beijing, Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak pledged to do "whatever it takes" to shrink global oil stockpiles back to their five-year average.

"There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average," Falih said.

"We've come to conclusion that the agreement needs to be extended."

Traders had anticipated a slightly shorter output cut deal extending to the end of 2017.

The deal still had to be ratified by other OPEC producers at their 25 May ministerial meeting.

"On the one hand, this is good news because we are looking at a situation where we would not have to worry oil production and its baggage for some time. [...] Although it will take some time to have an impact on this supply glut.

"On the negative side, we are still concerned about this news. We think that traders are reading too much into this situation and they are being too optimistic," said Naeem Aslam at Think Markets.

Aslam pointed to risks around compliance levels with the cuts amid rising production in Iran, not to mention increased US output, to back up the latter assertion.

As of 0927 BST front month Brent crude oil futures were higher by 2.5% to $52.16 per barrel on the ICE.