In order to rein in a glut, Saudi Arabia and Russian Federation said yesterday that they agreed to the need for a 1.8 million barrels per day (bpd) crude supply cut to be extended for nine months, until the end of March 2018.
"The agreement needs to be extended as we will not reach the desired inventory level by end of June", Saudi Arabia's Khalid Al-Falih said during the event with Russia's Alexander Novak.
The price for Brent crude oil, the global benchmark, was around $52 per barrel in early Tuesday trading, up more than 10 percent from last week.
OPEC members agreed in November to cut 1.2 million barrels a day of oil production. OPEC April crude production rose by 65,000 barrels a day to 31.78 million barrels, led by Nigeria and Saudi Arabia, the IEA said in its monthly report.
Even so, the IEA does not see global oil markets returning to balance-or the five-year average, which is used to measure the market balance-before the year's end.
Crude oil prices surged over 3% to their highest level in two weeks after the world's two biggest producers agreed in principle to extend a deal on output restraint through March of next year.
"The market will also be looking at export cuts and not just production cuts, which is what is required to rebalance the market".More news: Mourinho done with EPL games after latest defeat
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Major oil producers are preparing to extend output cuts until March 2018 in a bid to reduce a global supply glut.
It seems likely that the current deal amongst Opec nations and some other key oil producing nations will be extended.
Russian Federation and Saudi Arabia, the largest of the 24 producers that agreed to a deal to cut supply for six months starting in January, are reaffirming their commitment, which should prompt other countries to follow, according to Goldman Sachs Group Inc.
The initial terms of the deal called for a production gap through the first six months of the year with the option for another six-month extension based on market considerations.
While OPEC ministers will meet May 25 to decide whether to go forward with an extension of their cuts that started January 1, concerns remain about the pace of production growth.
In its monthly report last week, OPEC said that global markets are still suffering from oversupply and it appealed to other producers, including the USA, to stop pumping so much.
United States oil output witnessed a steep growth in the last one year by almost 10% since mid-last year and touched 9.3 million bpd production.