Why Oil Price Gains Won't Stick

After hitting a 52-week low in late June, oil prices have rebounded significantly, with Brent crude prices recently reaching $5 per barrel and WTI near $50 a barrel. Oil traders finally seem to be gaining confidence that the OPEC production cuts announced in late 2016 are helping to rebalance the oil market.

However, this confidence is probably misplaced. Rising oil prices have become an automatic cue for big production increases in the U.S., short-circuiting every rally. There's no reason to believe this time is any different.

Since early 2015, the oil market has been characterized by periodic rallies followed by big corrections. For more than a year, most of this volatility has taken place within a fairly narrow trading band of $45-$55 per barrel.

Source: Fool.com