Crude Prices Jump Over 4% After Non-OPEC Members Agree to Cut Oil Production

Eleven non-OPEC producers will make 558,000 bpd in production cuts.

Crude benchmarks were up over 4 percent early Monday after the Organization of the Petroleum Exporting Countries (OPEC) and non-member producers Saturday collectively reached a deal to reduce output for the first time since 2001.

"This agreement cements and prepares us for long-term cooperation," said Saudi Energy Minister Khalid al-Falih.

Russian Energy Minister Alexander Novak, meanwhile, said the deal will "speed up the oil market stabilisation, reduce volatility, attract new investments," which follows last month's surprise agreement by OPEC to cut its production by 1.2 million barrels per day (bpd).

Eleven non-OPEC producers will now add 558,000 bpd in production cuts, including a 300,000 bpd pledge from Russia, 100,000 bpd from Mexico, 45,000 bpd from Oman, and 35,000 bpd from Azerbaijan.

Kazakhstan pledged 20,000 bpd in cuts, surprising analysts after the International Energy Agency (IEA) predicted the country would boost production by 160,000 bpd in 2017.

With Nigeria and Libya securing exemption from the deal due to ongoing civil unrest, the remaining 58,000 bpd of reduction will come from Bahrain, Brunei, Equatorial Guinea, Malaysia, Sudan, and South Sudan.

While the commitment from non-OPEC producers fell short of the 600,000 bpd target, and cuts from several countries including Mexico and Azerbaijan seen as part of their natural decline in oil production, today's jump in crude prices reflects the reality that analysts and traders alike are nevertheless buoyed by the news.

"While a lot of the countries are formalizing natural declines, cuts by Russia, Kazakhstan and Oman are real. Russia and Kazakhstan were between them expected to add 400,000 bpd to production next year," said Energy Aspects' Amrita Sen.

Bunker buyers can expect a corresponding jump for marine fuel prices.