Speculation OPEC will extend its deal to curb output and ease a global glut is sending oil toward its biggest weekly increase this year.

Kuwait and fellow OPEC members Iraq, Venezuela, Angola and Algeria backed an extension of the cut agreement while meeting in Kuwait City over the weekend to discuss compliance with the pledged reductions. The supply curbs are gradually restoring the market to balance, the group’s Secretary-General Mohammad Barkindo said in a statement this week.

“The continued speculation around an extension to the production cut agreement is really the main driver,” said Daniel Hynes, an analyst in Sydney at Australia & New Zealand Banking Group Ltd. “Oil could drift around the low $50s until there is a bit more clarity on a decision to extend the OPEC deal, which will happen at the May meeting. The inventory side in the U.S. is starting to show signs of turning and that’s also provided support.”

Two years ago, when oil was trading around $50 a barrel, one hedge fund manager boldly called a 40 percent decline in the commodity, a prediction for which he has come to be known.

Oil hit a low of $26.21 in February 2016, one year after his call, before rallying to just above $50.

Crude oil will likely drift from the low $40s up toward $60 by the end of the year. I think it’ll be pretty flatish in the $50s during the summer, and then we’ll get that last December rally into year-end like we got last year, and probably finish in the high 50s, maybe hit $60.

There’s a lot of hope built into these markets today on the Trump trifecta of regulatory relief and tax cuts and fiscal spending. And I think there’s going to be a whole lot of nothing by the end of the year.

Uncertainty is dominating today’s oil markets, with production cuts, ballooning inventories and a rising rig count all adding to oil price volatility. And as the summer driving season approaches and oil companies return to their projects here are four key factors to watch closely

Inventory, Rig counts – An significant inventory build on the 7th of March sent oil prices tumbling, ending a period of relative stability for oil markets. The build-up of 8.2 million barrels at Cushing, Oklahoma sent prices below the psychological level of $50.

The inventory level now rests at 533 million barrels, the highest in history. At the same time, we have seen a rapid increase in the number of active oil rigs in U.S. The total number now stands at 652 after an increase of 21 rigs last week according to Baker Hughes. This is the highest level since September 2015. Given the remarkable adaptability of shale producers to low prices, these trends are likely to continue, adding yet more downward pressure to oil prices.

The OPEC deal-Extension or no Extension: Questions surrounding the possibility of an extension to the current OPEC deal can be heard in all corners of the oil market.

The outcome of both scenarios: extension or no extension, are going to yield the same results. If OPEC does extend the production cut we will see the same vicious cycle: prices will rise, more rigs will be added in U.S., production will increase and prices will stall. On the contrary, if the OPEC and NOPEC members do not reach an agreement then we will see what we saw in 2014-16, each producer will ramp up production vying for the market share. This will cause prices to either go down or to once again be stuck in limbo. A third scenario may see OPEC members agreeing while NOPEC nations leave the table. Russia is already preparing for $40 oil.

Even if the OPEC members were to agree to an extension, the world is only going to believe hard tangible facts, not rhetoric. But markets will have to wait until May to find out how the OPEC production cut saga will develop.

Summer Driving Season: This summer driving season might provide some cushion for oil prices. According to Jason Schenker “This year, the seasonal upside could be even greater than normal. With the lowest U.S. unemployment rate since before the recession of 2008, and two consecutive years of record SUV and light truck sales in 2015 and 2016, the coming summer driving season is likely to show records for miles driven and gasoline demand. In fact, there has been a record number of miles driven every month since December 2014. And a continued trend higher in the 12-month moving total of U.S. miles driven is likely to continue throughout 2017.” According to an article in Reuters, U.S. auto sales will remain strong in 2017 around 17.6 million.

E&P Projects: While the IEA recently stated its concerns about a lack of new projects creating a lack of supply, the recent uptick in prices has led many oil majors to restart their once abandoned projects. There are not only more projects coming on-line but the payback time has also decreased significantly. Goldman Sachs reports that the rising Shale production and the flurry of new oil projects may “result in an oversupply in the next couple of years”. Wood Mackenzie predicts that new oil projects will double in 2017 as it sees spending getting a 3 percent boost this year.

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Good analysis of  Commitments of Traders (COT) reports for crude oil.

Long oil speculators liquidated 16 million more barrels of length last week to end with 371 million barrels. This is 82 million barrels lower than their record-high position in February. But it is still 36 million barrels more than their position prior to the announcement of the agreement. I think this implies that the long liquidation is still not over.

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Spec shorts sold another 13 million barrels last week, increasing their short position to 111 million barrels. OPEC “headline risk” has seemed to run its course. Its talk has lost almost all credibility. It is meeting this week regarding compliance and will undoubtedly say how great things are, but the data simply does not support that.

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Hedge short position holders, mainly U.S. crude oil producers, covered (bought) 12 million barrels. Total hedges stood at 728 million barrels.

This position is still very high by historical standards, but down from a peak in mid-February. This position represents only 23% of U.S. crude production for one year, and so there is a lot more potential for hedge sales, though prices are less attractive for hedging. But I would expect to see more producer panic sales if speculators drive prices into the lower $40s.

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Hedge longs bought another 6 million barrels. Positions stand at 481 million barrels. The price break may have encouraged some to buy more, thinking the price drop represents better value. This group also includes oil refiners that make decisions based on refining margins, not the absolute price of crude.

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The Finance Ministry, the cabinet and the central bank are leaning on the cautious side in terms of their expectations regarding growth, driven still to a large degree by oil

Policy makers in Moscow said on Friday they see Urals at an average of $50 a barrel this year, but falling to $40 at end-2017 and then staying near that level in 2018-2019. As the central bank honed its forecasts, it also gingerly resumed monetary easing, pointing to the “uncertainty” in the oil market as a factor for its “conservative” forecasts.

Russia’s Finance Ministry similarly highlighted the $40 level in January when it announced that the central bank will start buying foreign currency on its behalf when crude exceeds that level in order to insulate the exchange rate from oil volatility. The price of $40 is additionally being used to calculate the country’s budget in 2017-2019.

Forecasting oil is no game for the Bank of Russia. Its 65 percent plunge in 2014 and 2015 battered the nation’s currency, forced an emergency rate increase in the middle of the night and pushed Russia into recession. The share of oil and gas revenue was at 36 percent of budget income in 2016.

The correlation between the ruble and oil has declined this year, falling to the lowest since August 2015, according to data compiled by Bloomberg. As crude slid below $50 a barrel this week, the Russian currency barely budged, weakening less than 1 percent, because its carry-trade appeal largely offset the dimming outlook for energy.

While OPEC won’t formally decide until May whether to prolong the deal, which lasts through June, officials will meet this weekend in Kuwait to discuss its progress. Oil will tumble to $40 if OPEC doesn’t extend its agreement later this year, one of the most prominent producers in the U.S. shale patch said this month.

China’s largest crude oil buyer Sinopec aims to ship more cargoes from Brazil, the United States and Canada, to help ensure stable crude supplies as the Middle East boost refining capacity and Africa suffers disruptions.

Shipments from the Americas hit an all-time high in March, boosting the region’s share of the Chinese market by 1.1 percentage points in the first quarter to close to 14 percent, data from Thomson Reuters Oil Research & Forecasts showed.

Asia needed to step up crude imports from the “new frontier”, the greater U.S. Gulf Coast region made up of the United States, Canada and Latin America, to meet its growing demand.

Chen said China, the world’s second largest oil consumer behind the United States, is on track to become the largest crude importer this year ahead of the United States.

China will add just under 2 million barrels per day (bpd) of refining capacity between 2016 and 2020, taking its total capacity to nearly 12.5 million bpd by the end of this decade.

Also, by end-2018, the total crude import quota for independent refineries will grow to 2 million bpd, about 500,000 bpd more from March 2017 as government approvals flow through.

Asia, which will account for a third of the world’s refining capacity by 2020, will have to look beyond traditional markets Middle East and Africa for crude supplies, Chen said.

In March, China’s crude oil deficit came in a hefty 15 million tonnes after touching a record 19 million tonnes in December 2016 as domestic production shrank while imports surged, customs data showed.

“Record imports are being driven by falling production, higher refinery runs, huge infrastructure and SPR (Strategic Petroleum Reserves) builds,” Virendra Chauhan from consultancy Energy Aspects said. The agency expects Asia’s crude imports, led by China, to rise by 900,000 bpd on year in 2017.