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London - World oil prices shot higher on Wednesday on forecasts that US shale production would likely drop and help ease a global supply glut, analysts said.
US benchmark West Texas Intermediate for delivery in May rallied to a two-month peak at $54.25 per barrel, before pulling back to $53.89, up 60 cents from Tuesday's close.
Brent North Sea crude for May hit a three-week high at $59.63 a barrel. It later stood at $59.16 in midday deals, up 73c.
"Oil prices are continuing their upswing," said Commerzbank analyst Carsten Fritsch.
"Brent is nearing the $60 per barrel mark, while WTI is already trading at a 2.5-month high of a good $54 per barrel.
"Speculative financial investors are clearly taking the latest news of a declining US oil supply as reason enough to further step up their investments in the oil market."
But he cautioned: "Despite all the euphoria, the production falls reported so far are not nearly sufficient to stop US crude oil stocks from rising, as inventory data due to be published ... this afternoon are likely to show."
The US Energy Information Administration said on Monday that output from the country's seven shale regions, which has driven production to a record high, looked set to fall by 57 000 barrels per day in May.
Analysts said a decline should help ease the global crude oversupply, which led to a collapse in prices of more than 50 percent between June and January.
"We have been seeing forecasts of lower oil production suggesting that current oil production should be dropping already," added Daniel Ang, analyst with Philip Futures in Singapore.
But United Overseas Bank said there could be a "price reversal" after the release of the weekly US crude stockpiles report later on Wednesday.
Analysts expect it to show another increase, pointing to weaker demand in the world's biggest oil consuming nation.
Traders meanwhile set aside the International Energy Agency's latest monthly report on Wednesday.
The Paris-based IEA cut its supply forecast for non-Opec countries, citing downturns in North America and the "worsening conflict" in Yemen.
The agency cut its 2015 forecast for non-Opec output by 120 000 barrels a day to 630 000 bpd "on the back of a slightly more negative outlook for the US LTO (light tight oil) production and Canadian non-oil sands output, and of the fallout from the worsening conflict in Yemen," it said in the report.
READ: IEA cuts non-Opec supply forecast, citing Yemen
Although Yemen is a small oil producer accounting for a fraction of global output with negligible effect on prices, it borders Saudi Arabia and affects other Gulf markets.
"Recently launched Saudi air strikes, while not targeting energy infrastructure directly, have led international oil companies active in the country... to practically halt operations and pull out expatriate staff," the energy watchdog said.
"The start of a Saudi-led military campaign against Yemen in late March sparked concern of possible supply disruptions through the area's vital sea lanes."
