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Crude futures surged by more than 4% in Monday-morning trade in Asia after more oil-producing nations agreed to slash production, a move aimed at pushing the oversupplied oil market into a rebalance, or even a deficit, to prop up oil prices.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in January recently traded at $53.79 a barrel, up $2.29 in the Globex electronic session. February Brent crude on London's ICE Futures exchange rose $2.26 to $56.59 a barrel, the highest level in more than a year.

Energy stocks also soared on the news. In Hong Kong, PetroChina was up 2.4% and Cnooc was up 1.8%. In Australia, Woodside Petroleum was up 3.1% and Oil Search was up 3.5%. In Japan, Inpex was up 1.7%.

Over the weekend, a group of heavyweight producers outside of the Organization of the Petroleum Exporting Countries, including Russia, agreed to scale back their output by 558,000 barrels a day. The move would come on top of the cut of 1.2 million barrels a day agreed to by OPEC in late November. The total reduction represents almost 2% of the global supply.

The non-OPEC cuts, if carried out as described over the first half of 2017, would represent an unprecedented level of cooperation among oil-producing countries that have been groping for ways to lift oil prices out of a two-year funk.

"This is truly a historic event," Russian Energy Minister Alexander Novak said. "It is the first time that so many oil-producing countries from different parts of the world have gathered in one room to accomplish what we have done."

The bulk of the cuts—300,000 barrels a day—have been pledged by Russia, which produces more crude oil than any other country. Other output reductions are promised by 10 other countries, including Oman, Azerbaijan and Sudan.

Bernstein Research noted that some of the non-OPEC supply cuts would come from natural decline but that most would come from self-imposed cuts.

The market got an extra boost of confidence on reports that Saudi Arabia indicated that, if necessary, the kingdom may be willing to take a deeper cut than the 486,000-barrel cut it had agreed in the November meeting.

"The latest development is buoying optimism in the market. It shows that the OPEC has overcome a significant hurdle," said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.

However, he also warned that compliance by the agreed parties remains a glaring downside risk, given these oil producers haven't always been forthcoming about their production levels, despite their pledges to rein in output.

The production-cut deal will take effect Jan. 1, and the oil producers will reconvene in six month to assess the deal.

"At this stage, the safe assumption is that they will be [compliant], especially, in the first few months," said Ric Spooner, chief market analyst at CMC Markets.

Another concern is how fast the U.S. shale producers will ramp up their production in a bid to capture the higher prices.

"While there will be a supply response from shale, we believe that as long as prices stay at around $60 a barrel, U.S. production will not increase by more than 500,000 from current levels," Bernstein said, adding that at that pace, increasing U.S. production wouldn't be enough to offset the decline in OPEC and non-OPEC output combined with the additional 1.2 million barrels a day in demand growth.

Higher oil prices are also ramping up inflation expectations, pushing yields on government bonds higher early Monday, with the yield on the 10-year U.S. Treasury last at 2.426% after a sharp rise on Friday to 2.469%. The yield on a similar bond in Japan reached its highest level since mid-February, last at 0.070% compared with 0.056% Friday. Yields rise as prices fall.

The weekend's deal "clearly is going to secure inflationary pressures" going into the first quarter of 2017, said Stuart Ive, a private client manager at OM Financial Ltd. in New Zealand.

Benoit Faucon, Nathan Hodge, Summer Said, Willa Plank and Rachel Rosenthal contributed to this article.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

December 11, 2016 22:35 ET (03:35 GMT)

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