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, are soaring to start 2018 and some oil market observers believe the commodity can deliver more upside.

Deadly protests in Iran, a member of the Organization of Petroleum Exporting Countries (OPEC), are bolstering oil prices to start 2018. The global market has suffered through a supply glut, but the Organization of Petroleum Exporting Countries and its allies have taken steps to rein in the oversupply. Recently, the United Arab Emirates, Saudi Arabia and Venezuela all reported lower monthly output.

“After prices were boosted by OPEC’s output curbs in 2017, the U.S. President has shifted the focus to geopolitical risks, with his pursuit of sanctions on Iran and North Korea potentially having significant consequences,” Bloomberg reports, citing a Citibank report. “That’s in addition to political disturbances in some OPEC members like Iraq and Libya that could see crude supplies decline, boosting oil to levels between $70-$80.”

Saudi Arabia projects oil revenue to jump about 80% by 2023 and expects its first budget surplus in a decade. Officials calculate rising prices and expanded output will raise income from oil sales to 801.4 riyals, or $214 billion, from 440 billion riyals this year. The kingdom is the largest OPEC producer.

“A reinstatement of U.S. sanctions on Iran likely would dislocate at least 500K barrels of the Iran’s oil exports, resulting in a $5 price increase to oil, the bank says, adding that combined with potential supply disruptions in Iraq, Libya, Nigeria and Venezuela could see global oil supply drop by more than 3M bbl/day this year,” according to Seeking Alpha.

For its part, OPEC remains concerned about the level of production by U.S. shale producers and the cartel is urging its U.S. rivals to pare output to support prices. According to the Energy Information Administration, crude oil product could hit 9.9 million barrels per day in 2018, which surpasses the prior high reached in 1970 of 9.6 million barrels per day.

Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the U.S. could prompt more upside for oil this year.

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