2020.06.1619:01:00UTC+00Oil Futures Close Higher On Demand Growth Hopes

Crude oil prices surged higher on Tuesday, buoyed by an upward revision in oil demand forecast for the year by International Energy Agency (IEA).

Optimism about production cuts and increased demand for energy amid reopening of businesses across the globe contributed as well to oil's sharp uptick.

The Federal Reserve's decision to expand its asset buying program and reports that the Trump administration is planning to increase infrastructure spending, by pumping in about $1 trillion helped raise hopes about energy demand.

West Texas Intermediate Crude oil futures for July ended up $1.26 or about 3.4% at $38.38 a barrel.

Brent Crude futures were up by about $1.20 or 3% at $40.92 a barrel.

The IEA's report said it expects energy demand to be at 91.7 million barrels per day this year, which is higher by about 50,000 barrels per day, compared to its estimate a month ago.

The agency, however warned that pre-pandemic level demand is unlikely as consumption by the aviation sector is not likely to see a significant surge in the near term.

The EIA report said oil supplies dropped by almost 12 million barrels per day in May thanks to output cuts by OPEC and allies.

Oil was also supported by the Energy Information Administration's report on Monday that said U.S. shale formations is likely to drop to near two-year low of 7.63 million barrels per day by next month.