Oil prices surged to a 17 month high following an agreement between Opec and non-Opec members to significantly cut oil output.

On Saturday, oil producers from outside Opec agreed to reduce output by 558,000 barrels a day, making it the largest ever production cut by non-Opec members. The deal follows an agreement made last month by Opec members to cut production by 1.2m barrels a day from 1 January 2017.

Brent crude rose by 5% to $57.04 a barrel, its highest level since mid-July 2015.

Fawad Razaqzada, market analyst at Forex.com, said: “Make no mistake about it – this historic agreement is a gamechanger. Although the crude oil rally has already started at the end of last month when the Opec first announced the deal, I think there is plenty of fuel left in this rally.

“Admittedly, after a big gap we may see a retracement of some sort in prices now but ultimately the fundamentals still point to higher levels going forward. The oil market will now be balanced earlier than would have been the case without a deal.

“It is very likely that US shale producers will take advantage of this opportunity to ramp up their crude output once again but this will be a worry for another day.

“On top of the now-favourable supply-side dynamics, the global economic recovery is continuing at a steady pace, especially in the US. So rising demand for oil from the US – and China – could be additional factors that could help fuel a much larger rally in oil prices than many had envisaged a few months ago.”

Written by