Saudis, Russians keep cuts on oil production

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 such as 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 surpassed 2,400 at one point Monday, reaching a new intraday record.

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.

Oil prices rose to their highest level in weeks after Monday’s announcement. The West Texas Intermediate crude gained 3.8 percent to $49.66 a barrel, while Brent crude rose 3.4 percent to $52.63.

“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.”

In the short term, large amounts of crude remain unsold and in storage. Saudi Arabia and Iran, in particular, have been selling some of those stores, blunting the impact of the cuts, according to Richard Mallinson, an analyst at the research firm Energy Aspects. And higher prices in recent months have thrown a lifeline to shale oil companies in the United States, where output had plunged when prices fell. With prices around $50 a barrel, production from shale companies is surging again.