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The U.S. Energy Information Administration (EIA) is now predicting less oil demand for this year, cutting its global demand forecast by 10,000 barrels per day to 1.62 million barrels per day.
The agency also cuts its estimate for global oil demand growth for 2018 by 50,000 barrels per day to 1.46 million barrels per day.
At the same time, the EIA’s latest Short-term Energy Outlook (STEO) report released Tuesday, raises its forecast on U.S. crude production and prices for this year. The agency forecasts US crude production will increase from estimated 8.9 million barrels per day in 2016 to 9 million barrels per day this year.
For 2018, the EIA forecasts U.S. crude oil production will climb to 9.5 million barrels per day.
Shortly after the release of the EIA forecasts, West Texas Intermediate (WTI) crude had slipped 84 cents or 1.58 percent, to US$52.17 a barrel. Brent crude was down 66 cents or 1.18 percent to US$54.82.
"Global oil supply and demand is now expected to be largely in balance during 2017 as the gradual increase in world oil inventories that has occurred over the last few years comes to an end," EIA administrator Howard Gruenspecht said in a statement.
Related: Has Big Oil Bought Into The Oil Price Recovery?
EIA has increased its price forecast for WTI and Brent benchmarks. The agency’s STEO forecasts average Brent prices at US$55 per barrel in 2017, with WTI at US$54, with Brent climbing $2 in 2018 to reach US$57 per barrel. This is up from last month’s STEO report which had forecast the benchmarks at $55 for WTI and $56 for Brent in 2018.
According to the EIA, strong demand and an agreement by OPEC and non-OPEC producers to cut supplies played the key role in pushing crude prices up this year.
Potential downward pressure on oil prices could arise from the expected rise in global output, which would also reduce the potential for significant oil price increases through next year.
By Damir Kaletovic for Oilprice.com
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Damir Kaletovic is a veteran investigative journalist covering Europe and the Middle East, and a senior consultant for Divergente Research.