US energy stocks join European peers' rally after surprise oil output cut

(Reuters) - U.S. energy stocks hit an over one-month high on Monday, following a rally in European peers as crude prices rose more than 6% following a surprise announcement by Saudi Arabia and other OPEC+ oil producers to cut production.

The S&P 500 energy index added 4.2%, eying its best day in six months, while the benchmark S&P 500 traded flat.

OPEC+ on Sunday announced further oil output cuts of around 1.16 million barrels per day, in a surprise decision that analysts said would cause an immediate rise in prices and the United States called inadvisable.

The move lifted Brent crude prices to as high as $86.4, their highest in a month and U.S. West Texas Intermediate crude rallied to hit $81.69, its highest level since January, as analysts scrambled to raise their oil price forecasts for the coming years. [O/R]

"The market dynamic has been to be underweight on or even short energy companies over the last few months... we could see a shift in sentiment there given this higher oil price backdrop," said George Cipolloni, portfolio manager at Penn Mutual Asset Management.

"Oil companies have done a really good job on their margins by keeping their costs low. So any amount of oil price incrementally higher from here is very good for margins and it's very good for these stocks."

U.S. oil majors Chevron and ExxonMobil rose 4.7% and 5.7%, respectively.

Other oil producers Occidental Petroleum, ConocoPhillips, Devon Energy, Marathon Oil and APA Corp gained between 6.3% and 9.5%.

Ovintiv Inc rose 9.5% after the shale producer agreed to buy oil-related assets in the Permian Basin for about $4.3 billion in cash and stock.

The STOXX Europe 600 Oil & Gas index ended 4% higher, its biggest one-day gain since November.

Alastair Syme, head of energy research at Citi, said investors had recently been reducing the weight of energy stocks in their portfolios, and that any move to re-weight would likely benefit most of the largest cap stocks.

(Reporting by Danilo Masoni, Medha Singh and Amruta Khandekar, editing by Alun John and Krishna Chandra Eluri)