New possible upward movement for oil prices

Bubbling oil prices — up 23 percent in 15 days — will be a focus Friday as traders watch the latest U.S. rig count data for more signs that U.S. production could pick up with rising crude prices.

The rapid rise in oil prices defies many analysts' expectations, but it has been driven in part by comments from OPEC members and other producers about a meeting in late September that could involve discussion on freezing production or other actions.

"We're pricing a more constructive market. We think the price is about right now," said Edward Morse, global head of commodities research at Citigroup. Morse said he believes the market is rebalancing, meaning demand is more in line with supply after a massive global oil glut.

Morse said while the OPEC talk is helping lift oil prices to a level he sees as reasonable, he does not expect the cartel to take any action. "It's a market misreading what's going to happen or not happen," he said.

New longs have been flooding the oil market but that does not mean the shorts, at record highs this month, are leaving. "The market is certainly talking out of both sides of its mouth," Morse said.

The bullish argument is that some producers, like Iraq and Iran, are getting close to the limit of what they can produce. Libya is expected to bring some oil back on line, while Nigeria still has many barrels shut in. Venezuela could also see production decline. That leaves the U.S. shale producers as one wild card.

"The forward [futures] curve is saying the price of oil is going to be in the low $50s next year, and we think it's going to be in the high $60s. At the end of this year, it should be sitting in a $50 range," he said.