OPEC announced it would extend cuts in oil output by nine months to March 2018 on Thursday, after November's landmark deal failed to clear a global supply overhang.
The move, which was then ratified by non-OPEC producers, was the base-case scenario for the market and means the 1.8 million barrel per day supply cut will roll over until the first-quarter of 2018.
In a press conference shortly after the announcement, Khalid Al-Falih, Saudi Arabia's energy and industry oil minister, said, "We considered various scenarios, from six (months) to nine to 12 and we even considered options for a higher cut... All indications are solid that a nine-month extension is the optimum and should bring us within the five-year average by the end of the year."
Oil prices extended earlier losses shortly after the announcement as traders reacted to the developments.
At around 5.20 p.m. London time, Brent was trading 4 percent lower at $51.80 a barrel with the U.S. West Texas Intermediate (WTI) benchmark edging down by nearly the same amount to sit at $49.09 a barrel.
Brent and WTI futures prices have tracked 13 percent and 14 percent higher respectively since this month's lows were reached on May 4.
However, stockpiles remain high and production from non-participating countries, including the U.S., has been rising, capping crude some way below the $60 a level earmarked by OPEC's
"It looks like the next six to nine months can be a 'sweet spot' for the oil market... That said, things get more complicated beyond the near term," Konstantinos Venetis, senior economist at research firm TS Lombard, said in an email.
"OPEC's action should best be viewed as a defensive supply 'taper' in the hope of better demand," Venetis added.
Saudi Arabia's delegate explained while all options had been considered ahead of the announcement - including deeper cuts and a possible six-month extension - he suggested reaching an agreement to curtail oil production by a further nine months appeared the "safe bet".
Shortly before the meeting, Johannes Benigni, chairman of JBC Energy Group, argued a nine-month extension would be woefully insignificant. He argued market observers were being too optimistic and stressed demand would not be balanced until at least the end of 2019.
"OPEC now giving a signal they're going to 2018 is great but you will see they have to roll on with their cuts. They will have to go to the end of next year and beyond," said Benigni, talking to CNBC outside of OPEC's Vienna headquarters ahead of the cartel's meeting on Thursday.
Furthermore, the reaction of U.S. shale producers will be a key factor in establishing price levels, said Benigni, adding "this supply response is a little bit of a risk for OPEC so if prices go really up it may not be in their interest."
The U.S. shale market is currently in the process of rebalancing, according to the JBC chairman, who says that the era of falling production costs has now been replaced by stability but could soon turn to a climate of rising costs.