Oil futures surged to a one-month high on Tuesday, boosting the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, to a gain of almost 5%.

Fueling the rally in the energy space, a monthly U.S. energy report argues that global oil demand could jump by the most in six years in 2016 while non-OPEC supply stalls, which suggests that the oil supply glut could be easing more quickly than expected, Reuters reports.

USO’s Tuesday surges comes after some professional traders departed oil futures, indicating they felt crude’s near-term upside was limited. “Speculators reduced their net-long position in West Texas Intermediate crude by 9.1 percent in the week ended Sept. 29, according to data from the Commodity Futures Trading Commission. Longs dropped from a 12-week high while shorts increased,” reports Mark Shenk for Bloomberg.

“Last week, the number of US Oil rigs fell by 26 to 614, which is a decline of 977 rigs from last year. Oil companies have been lobbying hard to get the 40-year export ban on Crude Oil repealed, and it looks as though the idea is picking up some momentum in both houses of Congress. Regardless, it looks as though the slump in commodity prices could last years, according to Goldman Sachs and Citigroup, which may act as headwinds for a possible comeback in Oil prices,” according to Options Express.

USO has been somewhat steady following a sharp reversal last month that forced a spate of short covering. A short position is a sale on a borrowed security. The investor needs to eventually return the borrowed stock by purchasing it back from the open market. If the price falls, the investor buys it back for less than he or she sold it for and pockets the profit. [Widening Contango Could Cut Into Popular Oil ETF’s Returns]

“Turning to the chart, we see the November Crude Oil contract continuing to trade in a narrow range. Prices have tested minor resistance near the 47.65 level. Prices may find additional resistance near the 49.25 mark. The RSI indicator is currently in neutral territory, but edging toward overbought levels,” according to Options Express

United States Oil Fund

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