Oil stocks topped the FTSE 100 on Monday after non-Opec producers agreed to curb production to help buoy floundering crude prices.
The UK’s blue chip index was down 0.1% at around 6946.53 points, but Royal Dutch Shell’s ’B’ shares rose 3% and BP jumped 2.4%.
Away from the top tier, Tullow Oil soared 9.6% and Premier Oil surged 9.9%.
Sterling was flat against the dollar at 1.256, but down 0.3% against the euro at 1.187.
Brent crude prices climbed more than 5% to around 57.03 US dollars per barrel (£45.33) in early trading, marking its highest level since July 2015.
Eleven countries including Russia, Mexico, Azerbaijan and Oman struck a deal this weekend to cut output by a total of 558,000 barrels a day, building on the 1.2 million barrel per day cut agreed by oil cartel Opec earlier this month.
Saudi Arabia, which heads the cartel, has also signalled that it could make even deeper production cuts.
The market has been in flux over the past two yeas, with oil prices falling as Opec refused to cut production in the hope that it would hit demand for rival US shale.
But Craig Erlam, a senior market analyst at OANDA, says there are still hurdles ahead.
“Even if we get full compliance in the deal, which is by no means a guarantee, US oil rigs are coming back online at a very fast rate – up to 498 last week from the lows of 316 in May – and output has been rising over the last month or two.
“This deal and the higher prices that comes with it will only accelerate the process and could offset a chunk of the cuts agreed by Opec, possibly threatening to derail the deal itself.”
Across Europe, the French Cac 40 was down nearly 0.1%, while the German Dax was down 0.5%.
In UK stocks, Barclays shares fell nearly 1% after announcing it will sell its French retail banking business to AnaCap Financial Partners as part of its drive to sell off non-core assets and focus on its core UK and US banking operations.
It means Barclays has now completed its exit from consumer-facing banking in continental Europe. However, it will retain its corporate and investment banking businesses in France.
Shares in online fashion retailer ASOS fell 0.6% following news that the company plans to hire an additional 1,500 people over the next three years to work at its London headquarters.
The online fashion retailer said it has taken on an additional 40,000 square feet to house the extra workers and will spend £40 million on renovating the space in Camden.
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