The world’s two biggest oil exporters agreed Monday to extend production cuts through March, sending the price of crude up 3.8 percent Monday to almost $50 a barrel and pushing the S&P 500 index to a new high.
With oil markets flagging, the world’s two biggest oil exporters agreed Monday to extend production cuts for several months, sending the price of crude soaring.
Major oil-producing nations have struggled of late to bolster prices, as inventories piled up and crimped the potential for demand. Prices dipped below $44 a barrel this month, their lowest level in more than a year.
Countries like Saudi Arabia and Russia — which are heavily dependent on energy sales to fund national budgets and government services — are trying to manage the markets by promising to reduce production. The move Monday pushed oil prices up nearly 3.8 percent, to almost $50 a barrel, the highest level in about three weeks.
The strength in oil prices sent U.S. stocks to new highs. With energy shares surging, the Standard & Poor’s 500 index closed at 2,402.32, edging past its prior record set last week.
Most Read Stories
- Look back at our live coverage of the solar eclipse WATCH
- Your guide to enjoying the eclipse from Seattle
- Solar eclipse’s tides blamed for broken net, up to 305,000 Atlantic salmon dumped into waters near San Juans
- 3 surprising Seattle restaurant closures — plus 11 more
- Watch: Alaska Airlines flight offers dramatic view of solar eclipse WATCH
The latest swings are proving problematic for global producers. For years, Saudi Arabia and other nations in OPEC were often able to easily prop up prices. But their clout has ebbed as new players like U.S. shale producers came into the market and the growth in demand for oil slowed.
Amid weak prices late last year, OPEC countries, along with Russia, agreed to cut around 1.7 million barrels from their collective output. It worked for a while as markets recovered. But the higher prices also drew in OPEC’s rivals, including shale oil producers in the United States.
That is forcing Saudi Arabia and Russia to step in again. The two countries agreed Monday to lower their production levels for nine months longer than originally agreed, through March. OPEC, of which the Saudis are the de facto leaders, is likely to follow suit when its 13 members meet in Vienna on May 25.
“What OPEC, and to some extent Russia, and these other countries have been doing since the price collapse of 2014 is pretending to manage the market,” said Robert McNally, a former White House energy adviser who is president of the Rapidan Group, a Washington-based research firm, and the author of a recent book on oil booms and busts titled “Crude Volatility.”
In reality, McNally said, they were simply “managing or manipulating sentiment.”