Oil rises 2% after Saudi and Russian Federation back longer supply cut

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James Woods, investment analyst at Rivkin Securities, said world oil supplies would likely remain plentiful, even if OPEC extended the production cut as expected.

Officials in Kuwait, Iraq, Iran and Venezuela voiced support for extending a crude output cut by OPEC and other producing countries.

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).

"To underscore the determination of oil producers to ensure market stability, predictability and sustainable development - the joint actions of the participating producers should be extended by 9 months, through March 31, 2018", Saudi Arabia and Russian Federation said in a joint statement published Monday by Russia's energy ministry.

Crude oil futures were up Tuesday, with prices headed closer to session highs reached in the prior US session, as expectations that the Organization of the Petroleum Exporting Countries will extend production cuts until early next year continued to boost trading sentiment.

Saudi oil minister Khalid al-Falih said Monday the deal extension would have the same volume allocations that were included in the December agreement. Some analysts said that U.S. production could still threaten to disrupt the market balance unless the cuts were deepened.

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At the end of November, the Organization of Petroleum Exporting Countries (OPEC) agreed to cut output by 1.2 million barrels per day (mb/d) from January 1, initially for a period of six months.

Novak said the new proposal foresees the same cuts in production with extension of time frame by 9 months.

The trading of oil would fluctuate between $40 per barrel to $55 per barrel while the cost of production is expected to remain at the center for $50 per barrel.

In its monthly oil market report, the Paris-based group noted Libya has raised oil production to 800,000 barrels a day, the highest point in three years, according to its preliminary data. United States oil production has risen by 10% over the past year. This fluctuation had resulted in the rise of 2.5 percent in the stock price of the crude oil in the commodity market.

Thus, OPEC countries reduced the average daily production by nearly 1.2 million barrels.

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