Global oil prices surged after a report said top exporters Saudi Arabia and Russia had agreed to freeze output before a key meeting in Doha on Sunday, rekindling hopes that major producers will rein in growth to support prices.

On Tuesday, Russia's Interfax news agency quoted an unnamed diplomatic source who said the two countries had struck a deal to tackle a global glut, and that the pact did not hinge on participation by Iran.

International Brent crude gained $1.86 (U.S.) to $44.69 a barrel, while West Texas intermediate oil rose $1.81 to $42.17. The U.S. benchmark has now climbed roughly 60 per cent after skidding to a 12-year low of about $26 in February.

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The TSX energy subindex climbed nearly 6 per cent before paring gains as investors piled into names that have been among the hardest hit in the downturn.

Big gainers included Encana Corp. (9.3 per cent), Cenovus Energy Inc. (7.4 per cent) and Baytex Energy Corp. (5.4 per cent). The loonie jumped 0.82 cents to 78.3 cents and the S&P/TSX composite index rose 1.2 per cent.

Crude prices have rebounded amid signs of strengthening demand and faltering output in the United States. The 21-month rout has pushed many shale producers to the brink and forced the world's energy giants to defer billions of dollars in spending.

Now, the market is starting to believe a brutal war for market share launched by Saudi Arabia and the Organization of Petroleum Exporting Countries is at an end, said Phil Flynn of Price Futures Group in Chicago. "The symbolism behind the meeting is very important."

"It also shows you that these producers, the only reason they're agreeing to do this is because they're past their pain point and can't take it any more. They realize that everybody's going to go broke if they continue with the status quo."

High-cost producers in Canada's oil patch are no exception. Last week, the Canadian Association of Petroleum Producers said industry spending is poised to drop this year to $31-billion (Canadian). That's down by an estimated $50-billion, or 62 per cent from 2014 levels in the biggest two-year decline since 1947, the lobby group said.

The toll has included tens of thousands of job cuts at Canadian producers, including Suncor Energy Inc., Cenovus and others. Meanwhile, cash-poor Alberta is expected to unveil a deficit of $10.4-billion in its budget this week as energy revenue evaporates.

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Some analysts remain skeptical that the meeting in Qatar will have any impact on physical oil markets that remain pressured by swollen inventories and uneven demand.

"In reality, whether or not an agreement is reached to freeze production will likely have little impact on physical markets, but the outcome and any apparent cohesion or lack thereof among participants should drive the next directional move in prices," Barclays PLC analysts led by Lydia Rainforth said in a note.

"Yet for all the noise about a freeze in output levels from key participants, the real drivers of a rebalancing of the market remain a combination of demand growth and non-OPEC supply adjustments," they said.

The bank said it expects non-OPEC supplies to fall by at least 1.2 million barrels a day this year – the largest drop since 1992 – as deep spending cuts start to bear fruit. At the same time, it assumes demand growth of one million barrels a day, led by gasoline.

Nonetheless, analysts say more cuts to employment and spending levels are likely as debt-saddled Canadian producers seek to appease jittery lenders. Already, some have been pushed into receivership and more are expected as banks conduct their semi-annual review of borrowing limits in the sector.