Oil futures closed at their highest levels in 15 months on the Wednesday and the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, is higher by nearly 15% over the past month.
Even with those superlatives, some oil market participants see more upside coming for crude.
OPEC plans to diminish output to a range of 32.5 to 33.0 million barrels per day from its current estimated output of 33.24 million barrels per day. While Saudi Arabia, OPEC’s biggest producer, has agreed to reduce output, Iran, Libya and Nigeria might not follow suit.
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.
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Rich Ross of Evercore ISI “noted that the commodity is testing the neckline of a head and shoulders bottom around $51 or $52. Technicians often view these patterns as a bullish reversal in trend,” report CNBC.
Recent supply data boosted USO and related ETFs on Wednesday.
Energy markets strengthened after the U.S. Energy Information Administration revealed U.S. crude storage levels fell by a bigger-than-expected 5.2 million barrels in the week ended October 14, a withdrawal for six of the past seven weeks, reports Timothy Puko for the Wall Street Journal.
Analysts previously anticipated an injection of two million barrels, which is in line with seasonal trends in October after the end of the summer driving season, further supporting the bullish trade.
Looking ahead, the Organization of Petroleum Exporting Countries will consider agreeing on output cuts for most members when the group’s energy ministers meet on November 30.
SEE MORE: Energy ETFs Rally as Russia Joins OPEC in Considering Supply Limits
“Just how high can oil go? According to Ross, another neckline can be formed by extending crude’s highs in May 2015, when oil hit $60. In other words, Ross believes that oil could rise another 15 percent from current levels, leaving $60 crude a very real possibility,” reports CNBC.
Other oil traders believe 2017 will be fertile ground for an oil rally. 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.
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