Oil prices have recovered from their 2014 nadir, as evidenced by the fact that after years of painfully low prices for energy producers, oil prices at the Brent crude global oil benchmark are now well over $60, briefly reaching $67.84 a barrel recently for a three-year high. Of course this is a far cry from the days when market pressure had forced the price of oil to over $100 a barrel, but it marks a return to market balance, allowing sellers to rid themselves of the excess oil inventories which they had accumulated since the dark days of 2014.

Concerns that new electric vehicles (EVs) entering the market will steal market share away from oil are premature. In fact globally, crude oil inventories continue to decline while demand continues to grow. However, production problems in places like the North Sea and Venezuela, combined with the OPEC agreement with key non-OPEC producers like Russia that will keep output down by 1.2 million barrels per day, translates into a macro energy market that is unlikely to see a sudden flood of production to take advantage of 2017’s price recovery.

Many oil producers are betting that prices will remain more or less stable through 2018, though there are a large backlog of drilled but uncompleted (DUC) wells in America, which could bring new supply quickly online should prices unexpectedly rise dramatically. Today’s tighter oil market is largely the result of voluntary restraint amongst actors like Russia and Saudi Arabia, but in the U.S. , shale producers are letting output climb again, while production in deep-water sites in the Gulf of Mexico is also increasing as longer-term projects come online. Energy pundits are already predicting that 2018 will see US crude production reach an all-time high, averaging 10 million barrels per day. That is enough to offset market worries about geopolitical risks like a Saudi-Iran conflict, the collapse of the regime in Tehran, or the reimposition of US sanctions of Iran, cutting off its oil reserves just as they have started to re-enter the global market. A reduction in the oil supply from any source would also be countered by increased production from states like Russia.