Seoul, London: Oil surged as Saudi Arabia and Russia extended their pact to manage the market and Canada’s largest producing province ordered unprecedented output curbs.

After their worst month in a decade, prices in New York and London advanced more than 5 per cent. Although Russia and Saudi Arabia have yet to confirm any fresh cuts, their leaders’ agreement over the weekend opens the door for a deal at Opec’s meeting this week in Vienna.

Canadian province Alberta’s decision to curtail production by 325,000 barrels a day drove oil’s rally, which largely ignored Qatar’s surprise announcement that it will leave the producer group to focus on natural gas.

“All in all the market was in desperate need of a psychological boost and that was provided this weekend, not only from Buenos Aires but also from Alberta,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Putin’s high-five with the Saudi Crown Prince Mohammad Bin Salman could also have triggered another much-needed reduction in supply.”

Investors are taking heart from the bullish news after crude collapsed into a bear market last month. Fears that the Opec and its partners will not curb output are easing. Trade tensions between the world’s two largest economies also appear to be thawing, allaying concerns about global oil demand.

Crude oil has not been included in the list of hundreds of products that each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.

Meanwhile, Qatar’s energy minister said the country would leave Opec from January, and would not be committed to any agreements by the group thereafter. Accounting for less than 2 per cent of the organisation’s output, Qatar’s exit is most significant for any potential impact on the group’s cohesion.

Qatar plays spoilsport

Qatar said it was quitting Opec from January to focus on its gas ambitions, marring efforts to show unity before this week’s meeting of exporters to tackle an oil price slide.

Doha is one of Opec’s smallest oil producers, but the world’s biggest liquefied natural gas (LNG) exporter.

Its minister of state for energy affairs, Saad Al Ka’abi, said Doha’s decision “was communicated to Opec” but said Qatar would attend the group’s meeting on Thursday and Friday, and would abide by its commitments.

He said Doha would focus on its gas potential because it was not practical for Qatar “to put efforts and resources and time in an organisation that we are a very small player in and I don’t have a say in what happens.”

Delegates at Opec, which has 15 members including Qatar, sought to play down the impact. “They are not a big producer, but have played a big part in it’s (Opec) history,” one Opec source said.

It highlights the growing dominance over policymaking in the oil market of Saudi Arabia, Russia and the US, the top world’s three oil producers which together account for almost a third of global output.

“It could signal a historic turning point of the organisation towards Russia, Saudi Arabia and the US,” said Algeria’s former energy minister and Opec chairman, Chakib Khelil.

— Reuters & Bloomberg