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(Updates throughout, adds background on price slump)
By Catherine Ngai
NEW YORK, Jan 10 (Reuters) - The decline in U.S. crude output that began amid a global slump in oil markets in mid-2014 appears finally to be over, the U.S. government said on Tuesday, as higher oil prices and increased drilling activity are set to boost output for this year.
The news is good for U.S. shale producers reeling from a two-year price slump that has forced millions of dollars of cuts in capital spending and caused the layoff of thousands of workers.
A historic deal reached by OPEC at the end of last year to collectively curb global supplies has pushed oil prices to trade near $55 a barrel this week. A year ago, oil was trading around $30 a barrel.
In its monthly short-term energy forecast released on Tuesday, the U.S. Energy Information Administration said crude oil production this year is expected to rise by 110,000 bpd to 9 million barrels per day compared with a year ago. Last month, it said production would fall by 80,000 bpd.
For 2018, oil production is set to rise by 300,000 bpd to 9.3 million bpd, the EIA added.
"The general decline in U.S. crude oil production that began almost two years ago is likely over, as higher average oil prices and improvements in drilling efficiency are giving a boost to output," EIA Administrator Adam Sieminski said in a statement.
Looking at its quarterly forecasts, crude production appears to have bottomed out in the third quarter of 2016.
Meanwhile, 2017 U.S. oil demand appears to be growing at a faster clip than previously expected, with the EIA forecasting a rise by 260,000 bpd compared to 240,000 bpd growth forecast previously.
U.S. oil demand for 2018 is set to grow by 370,000 bpd to 20.22 million bpd. (Reporting by Catherine Ngai; Editing by Marguerita Choy and Will Dunham)