On the back of Saudi Arabia's announcement that it will unilaterally enact an oil production cut, the price of the commodity jumped sharply on Tuesday. At one point, futures for the U.S. benchmark West Texas Intermediate (WTI) crude price topped $50 per barrel, a level not seen since February 2020, before settling down to $49.93. Brent Crude, meanwhile, ended the day at $53.60.

Saudi Arabia's surprising move is part of an agreement reached by OPEC and other major oil producing nations. The Middle Eastern country will cut off 1 million barrels per day from its production target of roughly 9.1 million. At the same time, Russia and Kazakhstan will enact modest increases, with the former bumping up its output by 65,000 barrels per day in both February and March, and the latter increasing its own by around 10,000.

Oil producer silhouetted in front of a rig at dusk or dawn.

Image source: Getty Images.

Saudi Arabia and Russia are at odds over production. Russia would like to see this ramped up overall, in order to stay competitive with cost-effective shale oil producers in the U.S. On the other hand, the Saudis believe that capping production will stave off price erosion.

As typically happens with a price jump, top oil stocks rose notably in trading in the wake of the Saudi announcement. The rally was broad throughout the sector and frequently vigorous, with Occidental Petroleum (OXY -0.46%) closing 10% higher on Tuesday to lead all S&P 500 index components. Non-U.S. companies also did well; BP (BP 0.40%), and Shell (RDS.A) (RDS.B) both saw gains of around 7% on the day.