Oil Markets in Supply-Demand Tug of War

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U.S. West Texas Intermediate (WTI) crude oil has been stuck in a wide yet fairly well-defined trading range of $42 – $55 per barrel since September 2016.  In the near-term, that range might shift modestly upward to $48 – $62, and drift lower over the long term by $10 to $15 per barrel.

High inventories and increased U.S. oil production have tended to push the price to the lower end of the range, while production cuts by the Organization of Petroleum Exporting Countries (OPEC), potential short-term supply disruptions, and incrementally stronger global economic growth have all worked to push the price into the upper portion of the range, and possibly expand the range toward $60 per barrel.   Also, note that despite the lower volatility associated with range-bound trading, open interest in NYMEX WTI crude oil futures has soared to record highs as uncertainty in the oil market remains elevated even if volatility is low on a historical basis. 

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