The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, along with other oil-related exchange traded products are among the brightest spots in the commodities patch this year.

However, a case can be made that oil’s rally is defying still troubling supply dynamics and tepid demand. Elevated levels of production remain an issue for oil as well. OPEC has kept up production to pressure high-cost rivals, such as the developing U.S. shale oil producers. The International Energy Agency expects it will take several years before OPEC can effectively price out high-cost producers.

Related: Oil ETFs at 7 Month High on Falling U.S. Inventories

Saudi Arabia previously said it would join a production freeze deal if Iran agreed to curb output. However, Iran has maintained that it should be allowed to raise production to previous levels before the introduction of Western sanctions over Iran’s nuclear program, instead arguing for individual-country production quotas.

[related_stories]

“Spreads in the U.S. and Europe moved deeper into contango this week as the return of Canadian barrels (expected) and the speedy return of Nigerian production (not expected) erased the briefly lived, but abnormally high level of unexpected outages and returned the spread narrative back towards a generously oversupplied physical market,” according to OilPrice.com.

A number of factors are weighing on the global crude oil supply chain, including wildfires in Canada that disrupted major oil sands production in Alberta, pipeline attacks in Nigeria and outages in Venezuela. Consequently, Goldman projects production will remain below demand through the second half of the year.

Showing Page 1 of 2