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“The headlines about a Saudi-Russian agreement are obviously what’s sending prices higher,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees US$3.4 billion.

Oil has rebounded after falling to the lowest level in more than 12 years amid signs a global glut will ease as U.S. output declines. Saudi Arabia, the biggest OPEC producer, said previously it would agree to a cap only if it’s joined by other suppliers including Iran, while Kuwait said a deal can be done without Tehran’s support.

Brent, WTI

Brent for June settlement advanced 91 cents US, or 2.1 per cent, to $43.74 a barrel on the London-based ICE Futures Europe exchange at 11:02 a.m. in New York. WTI for May delivery rose 75 cents US to US$41.11 a barrel on the New York Mercantile Exchange.

Output from U.S. shale formations will drop to 4.84 million barrels a day in May, the lowest in almost two years, a report Monday from the Energy Information Administration showed. Still, American crude supplies probably rose last week, remaining near the highest level since 1930, a Bloomberg survey showed.

“Prices are up on speculation that market tightening is underway,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “The productivity report yesterday shows that shale production will drop. There are also hopes that a production deal will be reached at this weekend’s meeting.”

— With assistance from Alex Nussbaum and Grant Smith.

Bloomberg News