Wednesday morning’s report from the U.S. Energy Information Administration (EIA) showed that crude and refined product inventories had dropped more than expected last week. Combined with an admission from Saudi Arabia’s oil minister that the cartel will seek to extend the existing production cuts for another six months, crude oil should have seen prices going up.

Shortly before noon, however, crude traded down about 0.2% for the day. West Texas Intermediate (WTI) crude prices have risen more than $5 a barrel over the past few weeks, from around $47 a barrel to around $53 a barrel. OPEC members and the cartel’s 11 cooperating partners in cutting production are seeking a price of around $60 a barrel, but what appears to be happening is that crude has settled into a band bounded by $47 at the low end and $53 at the high end.

That lower bound has been tested many times, according to a report from Drillinginfo, and recent price action appears to be settling on $53.50 or so at the top end.

The measure that many reports focus on is the balance of global production with existing global stockpiles. If production falls below consumption, stockpiles will be depleted. That is happening, but much more slowly than OPEC and many oil traders expected. And while rebalancing may be the goal, raising the price of crude is at least as important.

Anyone wanting to keep score at home should follow the Commitment of Traders report from the Commodity Futures Trading Commission (CFTC), issued weekly on Friday afternoons. The report for January 3, 2017, indicated that hedge funds and other managed accounts held 360,817 long contracts and 56,349 short contracts. Market participants, including producing hedging future production, held 83,402 long contracts and 146,718 short contracts.

As of March 28, hedge funds held 361,322 long contracts and 116,707 short positions. Producers held 474,056 long positions and 713,377 short positions. What this indicates is that the smart money (hedge funds) has swung toward expecting lower prices for WTI. Producers have also increased hedging by a factor of five by buying short contracts on their future production this year.

That indicates that prices below $50 will have little effect on rising production. And if crude prices do manage to go higher, expect producers to increase their hedges and keep producing at a higher pace, putting a brake on just how high prices will go.

While short covering could drive the price of WTI a bit higher, no boost to $60 a barrel is likely unless some geopolitical factor lights a fire under prices. Last week’s U.S. bombing of an airport in Syria had virtually no impact on crude prices and the noises coming out of North Korea are having a similar effect. However, if Russia or the United States starts making bellicose noises, that could be a different story.

In the meantime, Saudi Arabia’s desire to extend the 1.8 million barrel per day production cut is almost certain to be met by the other members of OPEC, but how strictly they comply with the cuts is a different story. Non-OPEC producers, particularly Russia, may not make further actual cuts even if they agree to do so. It all depends on what and how they choose to count.

WTI crude traded down about 0.4% in the noon hour Wednesday at $53.16. The contract closed at $53.40 on Tuesday.

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