Some 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.
OPEC is expecting the combination of falling supplies and increased demand to work down inventories and balance the Oil market by the end of the second quarter. The group will monitor and determine whether additional cuts are necessary the next time they meet in May. The EIA reported a larger than expected build of 4.1 million barrels last week. Analysts had only been anticipating an increase of 1.2 million barrels. While this news was bearish for the Oil market, it served as a minor distraction from the OPEC information that was coming out,” according to Options Express.
Eleven other major oil-producing countries that are not OPEC members, including Russia, have also vowed to trim output. Russia is the largest non-OPEC producer, making its production reduction efforts a significant part of oil’s recent resurgence.
“Separately, Russia’s Energy Minister Alexander Novak said the country was starting to implement its own planned cuts, in conjunction with an agreement among non-OPEC producers,” notes Reuters.
For more information on the crude oil market, visit our oil category.