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Russia, Saudi Arabia agree to extend oil output cuts until March 2018

Saudi Arabia's Energy Minister Khalid al-Falih and Russia's Energy Minister Alexander Novak shake hands after a joint briefing in Beijing, China on May 15, 2017.

[BEIJING] Saudi Arabia and Russia have agreed to extend crude oil output cuts until March 2018 in their latest effort to rebalance the global crude market, energy ministers for the two major oil producers said on Monday.

The next round of cuts will be on the same terms as the existing deal, Saudi energy minister Khalid al-Falih said at a joint briefing in Beijing with his Russian counterpart Alexander Novak.

News of the joint deal sent crude prices up more than 1.5 per cent in Asian trading.

In a joint statement issued after the briefing, both ministers agreed to do whatever it takes to reduce global inventories to their five-year average and expressed optimism they will secure support for the extension from other producers.

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Under the current agreement, the Organization of the Petroleum Exporting Countries (Opec), of which Saudi Arabia is the de-facto leader, and other producers including Russia pledged to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.

Major producers have been forced to consider lengthening the cuts as crude futures have languished around US$50 per barrel as markets remain well supplied even after the current deal.

Russia is the world's biggest oil producer, while Saudi Arabia is the biggest exporter. Together, they control around 20 million bpd in daily output, equivalent to a fifth of daily global consumption.