US cuts oil production forecast through 2021 - padding the crushed market before a critical OPEC meeting
- The US's oil production will slow to an average of 11.8 million barrels per day in 2020 and 11 million barrels per day in 2021, the Energy Information Administration announced Tuesday.
- The production cuts aim to prop up demand for the battered commodity market and arrive days before OPEC, Russia, and other producers meet to negotiate collective pumping reductions.
- President Trump recently threatened to impose "very substantial tariffs" on Russia and Saudi Arabia if the two nations don't de-escalate their oil-price war and keep the market from sliding even further.
- Watch Brent crude oil trade live here.
The US is slashing its forecasted oil output as demand tanks and investors hope for Thursday's OPEC+ meeting to bring further easing.
The world's most traded commodity faces unprecedented pressure as Russia and Saudi Arabia flood the oil market with unwanted inventory. Travel restrictions and stay-at-home orders have kept consumers from capitalizing on historically low prices.
US production is projected to average 11.8 million barrels per day through the rest of the year, the Energy Information Administration announced Tuesday, down from its previous 12.99 million barrel-a-day forecast. The EIA's 2021 forecast was revised lower by 1.6 million barrels per day to roughly 11 million barrels per day on average.
The agency sees the price of Brent crude - oil's international benchmark - averaging out to $33 per barrel through 2020, its lowest level in four years and roughly half of its 2019 average. The average price will recover to $46 per barrel in 2021, the EIA added.
"Despite recent news of OPEC+ emergency meetings within the next few days to discuss production levels, without an agreement actually in place, EIA assumes no re-implementation of an OPEC+ agreement during the forecast period," the agency said in its Tuesday report.
The global price war began after Russia declined to cut production and support the coronavirus-hammered commodity market. Saudi Arabia retaliated in early March by slashing its official selling price and increasing its production activity in an attempt to take market share from Russia. An upcoming meeting of OPEC, Russia, and other producers could result in a collective pumping cut to shore up demand, but fears of another price-war spat linger.
President Donald Trump has called on the dueling producers to make peace and end their streak of price cuts and production hikes. In a Sunday press briefing, the president threatened to impose "very substantial tariffs" on Russia and Saudi Arabia if the countries couldn't coordinate on a de-escalation of their price conflict.
President Trump foreshadowed the lowered US production forecast on Monday, telling reporters that prices were pressuring oil firms to slow their pumping.
"The cuts are automatic if you're a believer in markets," Trump said, according to Bloomberg. "It's supply and demand. They're already cutting back and they're cutting back very seriously."
Brent crude traded at $32.12 per barrel at 3 p.m. ET Tuesday, down roughly 52% year-to-date.
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