Oil prices slid on Tuesday, taking away more of last week’s record gains as traders became increasingly sceptical of a deal to cap global oil production and the latest forecasts for US oil production revealed a slump this year and next because of low prices.
Saudi Arabia, Russia, and allied oil producers have made it clear they will only agree to deep cuts to their crude output at talks this week if the US and several others (such as Canada) cut production as well.
But the US Energy Information Administration cut its 2020 forecast for West Texas Intermediate and Brent crude oil prices, according to the monthly Short-Term Energy Outlook report released Tuesday.
The EIA put its 2020 WTI oil price forecast at $US29.34 a barrel, down 23% from its March forecast. It also cut its Brent crude price forecast by nearly 24% to $US33.04 for 2020.
The agency expects US crude production of 11.76 million barrels a day this year, down 9.5% from the previous view, with its forecast for 2021 output down nearly 13% at 11.03 million barrels a day.
The US produced 13 million barrels a day in late March, down 100,000 barrels from the previous week. Analysts say the EIA estimates are still too high and need to come down by another million barrels a day.
The US State Department claimed the new forecast as evidence the US is cutting production – it isn’t, these are just forecasts and the Trump or any other administration can’t order the industry to cut its output for antitrust reasons.
OPEC and its allies will discuss a 10 to 15 million barrels a day production cut in a teleconference on Thursday but have made it clear they want US cuts to play a part. The State Department’s attempt to claim the new, lower forecast as evidence of a cut wasn’t convincing anyone.
Against that backdrop, West Texas Intermediate crude for May delivery fell by $US2.45, or 9.4%, to settle at $US23.63 a barrel in New York. It rose back over $US24 a barrel in after-hours trading into Asia.
In Europe, June Brent crude lost $US1.18, or 3.6%, to settle at $US31.87 a barrel.