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Oil rallies on lower US output forecast

New York - Global oil prices rallied modestly on Tuesday from five-year lows after a US agency trimmed its forecast for 2015 US output due to drilling-budget cutbacks.

US benchmark West Texas Intermediate for delivery in January gained 77 cents to $63.82 a barrel on the New York Mercantile Exchange.

European benchmark Brent oil for delivery in January advanced 65 cents to $66.84 a barrel in London.

The gains interrupted a fairly steady downward trend in oil prices that included a four percent decline Monday. Analysts said a small bounce in prices typically follows such a big fall.

Tuesday's action came as a monthly US Department of Energy outlook modestly reduced its 2015 US oil production forecast to 9.3 million barrels per day from the 9.4 million barrels per day previous estimate.

The report said it expects lower overall output growth because of drilling cutbacks "due to unattractive economic returns in some areas" and delays in some projects.

John Kilduff, founding partner at hedge fund Again Capital, called the forecast "mildly supportive".

Kilduff said Tuesday's drop in the dollar also benefited dollar-denominated commodities, including oil.

Other supporting factors cited were projections that a weekly US petroleum inventories report to be released Wednesday would show lower crude supplies and speculation that the Organisation of the Petroleum Exporting Countries would convene an emergency meeting soon to respond to lower prices.

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