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Oil prices are up but are production cuts doing more harm than good?

One thing is for sure: Oil prices are rebounding and fast, as OPEC sticks to its guns, and remains committed to 1.8 million barrels per day (bpd) cuts till end 2018.

OPEC’s 14 members’ output reaches 39.2 million bpd, while estimated overall global demand for oil is at 97.8 million bpd, and current cuts are aimed at bringing reserve levels at 5 year averages, and reduce a global supply glut which pushed oil prices as low as $30 per barrel at the start of 2016.

The cuts are a hard pill to swallow as most prominent oil producing countries, and a good number of not so prominent non-OPEC nations, see potential revenues slipping away at the $60-$70 range, while the US pumps away and gains market share.

But OPEC has twisted some hands, resolute.

Read: Trump is not crazy: He is strong arming both Saudi and Russia with oil muscle

Prices go up again

Reuters revealed that oil prices have risen again on Monday as Saudi says Sunday that producers will cooperate on supply cuts beyond 2018.

Brent crude futures were at $68.9 a barrel up 25 cents, or 0.4% from their last close while US WTI crude futures were at $63.6 a barrel, up 24 cents, or 0.4%, from their last settlement.

“There is a readiness to continue cooperation beyond 2018…The mechanism hasn’t been determined yet, but there is a consensus to continue,” Saudi Arabia’s Energy Minister Khalid al-Falih said in Oman during an OPEC meeting.

“The crude market will take all of 2018 to reach a normal level.”

Nations participating in the output deal had a compliance rate of 129 percent in December and 107 percent for all of 2017,

Related: OPEC and oil producing nations’ newest oil scare: Prices rising too fast

Al-Falih said excess oil inventories have declined by 220 million barrels from a level of 340 million barrels in early 2017, or some 120 million barrels above their historical five-year average.

OPEC is next scheduled to meet in Vienna, Austria, on June 22, and re-evaluate.

US Output rising

Bloomberg said that while Brent crude gained 2.6% this month, “U.S. oil output is set for strong growth this year as prices rally,” quoting a recent International Energy Agency (IEA) report.

“The US is set to overtake Saudi Arabia as the world’s number two oil producer after Russia this year, as shale companies, attracted by rising prices, ramp up drilling,” the IEA said last Friday.

“This year promises to be a record-setting one for the US,” the IEA wrote in its monthly market report.

US crude production is at 9.9 million bpd, the highest level in nearly 50 years, same as Saudi, second after Russia.

“Relentless growth should see the US hit historic highs above 10 million bpd, overtaking Saudi Arabia and rivalling Russia during the course of 2018 – provided OPEC/non-OPEC restraints remain in place,” it said.

This will happen thanks to shale production, an expensive procedure that extract oil and gas by blasting deep underground to release hydrocarbons trapped between layers of rock.

Read: Saudi Alwaleed’s Kingdom Holding could be crumbling as negotiations near end

Target oil price also rising

CNBC reported that In recent weeks, big investment banks have raised their target price for oil as crude futures have risen to multi-year highs.

“Bank of America Merrill Lynch and Morgan Stanley both upped their forecasts for crude prices this week, while Goldman Sachs said the risks of prices overshooting its current targets are mounting,” said CNBC.

“A rally sent oil prices nearly 6 percent higher for the year, to trade at their best since December 2014. Crude has surged 133% since hitting a multi-year low of $27.30 a barrel in February 2016.”

One market watcher expects these gains to be short-lived.

“However, market conditions do not currently support crude oil above $60 a barrel, John Kilduff, partner at Again Capital and a veteran market watcher, told CNBC.

“As we get into the new year now and another season of refinery maintenance and much lower gasoline demand, I see the base case fundamentally as arguing for lower prices from here at least for a while,” Kilduff told CNBC’s “Futures Now” this week.

Read: The UAE, not Trump, could steal limelight at Davos 2018

Kilduff does not see a return to the lows seen in 2015 butforecasts a range of $50 to $55 a barrel as more appropriate, same as November 2017 levels.

The Financial Times (FT) asked if the rapid run up in oil prices from below $45 a barrel just seven months ago has lead many investors to ask if $70 a barrel will mark the peak for the market?

“Demand is now growing much faster than it was in the first half of this decade, meaning it takes more supply to weigh on prices. The strongest global economic growth in years and (relatively) low prices are seen boosting global oil consumption by at least 1.3m b/d this year, a number the IEA acknowledges is “conservative” compared with some forecasts,” FT said