Record Bullish Bets on Oil Raise Hopes-and Fears

“Crude oil is stuck in a range”.

Markets lack proof that OPEC nations have really trimmed supplies.

Oil prices have remained above US$50 a barrel since producers agreed the deal in December, incentivizing drillers in low-priced USA shale producing regions to ramp up activity.

However, US and Canadian producers are trying to pump oil in order to gain market share.

The experts now expect Brent crude futures to average US$58.01 a barrel this year, compared to a forecast for an average of US$57.43 in the previous Reuters poll.

Investors are concerned that the increase in USA production will offset the output cuts pledged by OPEC/non-OPEC countries.

In 2016, OPEC began efforts to end a global fuel supply glut, which led to oil prices getting as low as $27 per barrel.

As the oil market for 2017 gets clearer, it further reinforces the thesis that the production cut by OPEC, Russia and others will do little to sustainably improve market conditions, or the price of oil. The publication’s survey of 15 investment banks saw them raise their average price forecast for 2017 to $56 a barrel, up around $1 since the same survey was conducted a month ago.

“This is very high, a good number”, an OPEC source said of the January compliance estimate. The increased US production continues to offset OPEC’s efforts to rebalance the global oil market. United States crude oil inventories rose for the third consecutive week. That would have a knock-on effect of also pushing up the price of domestically produced WTI by around 20%. While prices are less volatile, “a multitude of factors could see oil-price volatility return, especially with investor length at an all-time high”. The close below this level is giving the market a downside bias.

It was last at $52.36 by 4:15AM ET (09:15GMT), down 29 cents, or 0.55%, after losing 54 cents, or around 1%, a day earlier.

Olivier Jakob, managing director of Switzerland-based consultant Petromatrix, said in an emailed report that USA shale oil is already on a sharp rebound after declines past year.

OPEC players are eagerly trying to prop up prices through production cuts, as their oil-dependent economies need a quick rescue.