Oil prices surged by two per cent on Tuesday to their highest since November, after Saudi Arabia and Russia extended their voluntary supply cuts by three months to the end of this year, worrying investors about potential shortages during peak winter demand.

Brent crude futures rose by $2.08, or about 2.3pc, to $91.08 a barrel by 11:43am EDT (1543 GMT), eclipsing the $91 level for the first time since last November.

Meanwhile, US West Texas Intermediate crude (WTI) October futures rose $2.42, or about 2.8pc, to $87.97 a barrel, also a 10-month high.

Investors had expected Saudi Arabia and Russia to extend voluntary cuts into October, but the three-month extension was unexpected

“It would appear they’re trying to double down and capitalise on the recent price moves. Put a big buffer in place for when the cuts end,” OANDA analyst Craig Erlam told Reuters.

Both countries said they would review the supply cuts monthly and could modify them depending on market conditions.

“With the production cut extended, we anticipate a market deficit of more than 1.5 million bpd in 4Q23. So, with oil inventories set to fall further over the coming months, we expect Brent to rise to $95/bbl (barrel) by year-end,” UBS analyst Giovanni Staunovo wrote in a note to clients.

Also supporting oil prices on Tuesday, Goldman Sachs said it now sees the probability of a US recession starting in the next 12 months at 15pc, down from an earlier forecast of 20pc. Prospects of the US economy avoiding a hard recession have helped lift oil demand and prices in recent months.

Brent futures, which are used to price over three-quarters of the world’s traded oil, have gained by about 26pc since late June, after Riyadh first announced its voluntary cuts.

The premium of the front-month Brent contract to the six-month contract rose to more than $4 a barrel on Tuesday, the highest since November 2022. This structure, called backwardation, indicates tightening supply for prompt delivery.