Oil climbs as US reduces its production forecasts for the next 2 years

Oil prices gained momentum Tuesday after the US government trimmed its production forecasts for 2020 and 2021.

West Texas Intermediate crude oil gained as much as 8.7 per cent on Tuesday to $US26.23 ($40.56) a barrel. International benchmark Brent crude jumped as much as 3.6 per cent, to $US30.70 per barrel.

The Energy Information Administration on Tuesday said it expects oil production to average 11.7 million barrels per day through the end of the year, down from its previous forecast of 11.8 million barrels per day.

The agency also cut its 2021 forecast to 10.9 million barrels per day, a 130,000-barrel decrease.

In addition, the EIA revised down its 2020 US oil demand forecast as the coronavirus pandemic continues to disrupt the economy as well as travel.

Oil prices have whiplashed amid the coronavirus pandemic, which has cratered global demand and led to a glut of the commodity. In an effort to boost the market, OPEC and its allies in April agreed to historic production cuts, and Saudi Arabia this week pledged to cut oil output even further.

The move prompted President Donald Trump to tweet that the cuts were boosting oil prices and making US energy companies “look very good again.”

As some countries begin to slowly reopen after sweeping lockdowns to curb the spread of coronavirus, some demand has returned in China and India.

Still, oil prices are down roughly 57 per cent this year, and there is continued worry that a supply glut could threaten storage, sending prices lower in the future.

This article first appeared on Business Insider Australia, Australia’s most popular business news website. Read the original article. Follow Business Insider on Facebook or Twitter.