Oil rallied above $42 a barrel, buoying stocks and commodity prices worldwide amid a revival in optimism over the global economy.

Energy shares in the Standard & Poor’s 500 Index surged the most since February after Russia and Saudi Arabia were said to have forged a deal on freezing oil output. Metals jumped, bolstering the Bloomberg Commodity Index and offsetting the impact of the International Monetary Fund’s warning on global stagnation. The yen fell versus all its major peers, as Treasuries and German bunds slid amid diminished demand for haven investments.

Crude oil is extending its 14 percent climb this year amid prospects a drop in U.S. shale production will help ease a global glut in the commodity. Traders are focused on a meeting in Doha set for April 17, where major producers, including Russia and Saudi Arabia, are due to discuss arresting production. Speculation the oil market could soon find some enduring stability is helping to prop up equities, even as investors brace for what’s projected to be the worst American earnings season since the global financial crisis. The Federal Reserve’s pared timeline for interest-rate increases is also supporting gains.

“There’s continued positive sentiment that is a function of a more dovish Fed as well as continued oil price strength and weakness in the dollar,” said David Spika, the Dallas-based global investment strategist for GuideStone Capital Management. “Oil prices have really been the driver of sentiment, with a high positive correlation.”

David Fuller's view

While the Doha meeting this Sunday may be only another small step, the reality is that oil producers are still burning through cash reserves at today’s prices.  Oil is no different from any other commodity; less production is the key to higher prices.  Most of this year’s rally to date has come from short covering.  

(For considerably more coverage of industrial commodities and precious metals, please listen to the Audio.)