Kuwait and Saudi Arabia agreed on Tuesday to end a five-year dispute over their shared Neutral Zone in a deal which will allow production to resume at two oilfields that can pump up to 0.5% of the world's oil supply.

The Gulf neighbours halted production at the Khafji and Wafra fields, which together produce some 500,000 barrels of oil a day (bpd), in 2014 and 2015, respectively.

U.S. oil company Chevron, which jointly operates the Wafra field with the Kuwait Gulf Oil Company (KGOC) on behalf of Saudi Arabia, said it expected it to return to full production within 12 months.

Kuwaiti Foreign Minister Sheikh Ahmad Nasser al-Mohammad al-Sabah and Saudi Minister of Energy Prince Abdulaziz bin Salman signed the agreements in Kuwait, state news agency KUNA said.

"The most important point is the final demarcation of the entire border ... in addition to defining sovereignty on both sides of the divided zone which translates into a real achievement," said Saudi economist Fadl Alboainain.

Prince Abdulaziz told Reuters in December that resuming production from the oilfields would not affect commitments by the Organization of the Petroleum Exporting Countries and other major oil producers (OPEC+) to curb crude output.

At a ceremony at Wafra on Tuesday, Kuwaiti Oil Minister Khaled al-Fadhel echoed that view.

"The resumption of production at the Khafji and Wafra oilfields is not linked to the international commitments of Saudi Arabia and Kuwait," he said.

Saudi Arabia and Kuwait have been reducing oil supply as part of the broader OPEC+ pact, which expires in March.