The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), have been scuffling in recent days with oil market observers closely watching the $40 per barrel level. While some oil traders are not anticipating a significant decline in crude prices, traders are cautious about the commodity’s near-term upside potential.

While production has declined in the U.S., recently rebounding oil prices are encouraging exploration and production companies to revisit spending plans with some increasing capital expenditures. That has some oil market observers concerned about a rising rig count and the subsequent impact on crude prices.

Related: A Factor that Could Hinder Oil ETF Investing

Obviously, production is a key element in the decision-making process regarding energy investments. Currently, oil investors face conflicting reports regarding output. For example, Venezuela’s crude output is plunging to multi-year lows while Algeria is looking to boost production. Both countries are members of the Organization of Petroleum Exporting Countries (OPEC).

“High levels of refined products are weighing on the market (more below), and while all major analysts see the market continuing down the path towards supply/demand balance, there is disagreement over how quickly that will arrive. In the very short-term, there do not seem to be a lot of bullish catalysts on the horizon, although weekly EIA data could provide a lift if stock drawdowns are stronger than expected,” according to OilPrice.com.

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