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.
“However, the dollar’s role in fueling the bull run for oil does not mean that current trends will continue,” according to OilPrice.com. “With the dollar at its weakest since 2014, the U.S. government could make more hawkish statements to shore up confidence in its strong-dollar policy. Any rebound in the strength of the dollar could upset the oil price rally.”
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