Oil prices surged by 12 per cent amid signs that the world’s largest producer, Saudi Arabia, had substantially cut production.

In recent days, Saudi Arabia has cut supplies of crude to key customers and is also believed to have slashed production by up to 600,000 barrels per day from a peak of 9.7million barrels in July and August.

Reports that Riyadh had cut production indicated that a decision taken last month by OPEC to defend prices by lower the cartel’s production by 1.5 million barrels per day starting this month was being observed by its 13 member countries.

The price of a barrel of US crude jumped $6.62 to settle at $70.53 a barrel, after rising as high as $71.77 earlier in the session. Oil has not traded above $70 in nearly two weeks. London Brent crude was up more than $7 before settling up $5.96 to settle at $66.44 a barrel.

There had previously been some uncertainty in the oil market over whether or not the Saudis, traditionally the most dovish member of OPEC, would implement such a large cut.

Other OPEC members, who together produce 40 per cent of the world’s oil, also appeared to have cut production.

The United Arab Emirates has reduced its production to around 2.3 million barrels per day (bpd) from around 2.5 million barrels per day.

Algeria and Qatar have both also cut production by 71,000 and 40,000 barrels respectively.

A surge in global stockmarkets also helped shore up the oil price as traders bet that the economy might not weaken as much as expected, supporting global demand for energy.

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