Oil prices jumped more than $1 a barrel on Monday after the world's top exporter Saudi Arabia pledged to cut production by another 1 million barrels per day from July, counteracting macroeconomic headwinds that have depressed markets.
Brent crude futures were at $77.64 a barrel, up $1.51, or 2%, at 0014 GMT after earlier hitting a session-high of $78.73 a barrel.
US West Texas Intermediate crude climbed $1.41, or 2%, to $73.15 a barrel, after touching an intraday high of $75.06 a barrel.
Both contracts extended gains after rising more than 2% on Friday as the Saudi energy ministry said on Sunday its output would drop to 9 million barrels per day (bpd) in July from around 10 million bpd in May, the kingdom's biggest reduction in years.
The voluntary cut pledged by Saudi is on top of a broader deal by the Organization of the Petroleum Exporting Countries and their allies including Russia to limit supply into 2024 as the group seeks to boost flagging oil prices.
The group, known as OPEC+, pumps around 40% of the world's crude and has in place cuts of 3.66 million bpd, amounting to 3.6% of global demand.
"The move by Saudi Arabia is likely to come as a surprise, considering the most recent change to quotas had only been in effect for a month," ANZ analysts said in a note.
"The oil market now looks like it will be even tighter in the second half of the year."
Consultancy Rystad Energy said the additional cut by Saudi is likely to deepen the market deficit to more than 3 million bpd in July, which could push prices higher in the coming weeks.
Goldman Sachs analysts said the meeting was "moderately bullish" for oil markets and could boost December 2023 Brent prices by $1-$6 a barrel depending on how long Saudi Arabia maintains output at 9 million bpd over the next six months.
However many of these reductions will have little real impact as the group lowered the targets for Russia, Nigeria and Angola to bring them into line with their actual production levels.
By contrast, the United Arab Emirates was allowed to raise output targets by around 200,000 bpd to 3.22 million bpd.
"UAE has been allowed to expand output, at the expense of African nations, which had their unused quotas lowered under the new agreement," ANZ said.
In the United States, the number of operating oil rigs slumped by 15 to 555 last week, their lowest since April 2022, Baker Hughes Co said in its weekly report on Friday.
Drilling has slowed since December due to weaker prices, higher costs and as companies divert spending to repaying shareholders.