The surplus in crude oil supply that has led to a two-year price rout has been eroding since the second quarter and will be “gone” by the beginning of the second half of 2017, PIRA Energy Group founder Gary Ross told reporters on Wednesday.

A massive glut in oil brought crude prices crashing from the $100 a barrel range in mid-2014 to as low as about $27 early this year.

Organization of Petroleum Exporting Countries last week agreed to modest oil output cuts in the first such deal since 2008, limiting production to a range of 32.5 million-33.0 million barrels per day.

Global benchmark Brent crude prices have risen more than 10 percent in the week since the deal.

The decision by OPEC to embrace production cuts will help move crude prices toward a target of $50-$60 per barrel, said Ross, who is now chairman of the consultancy.

OPEC’s policy has shifted as Saudi Arabia is targeting that price range and Iran has become more willing to accept an agreement, Ross said.

On Wednesday oil prices rose about 2 percent, touching their highest since June after an unexpected drop in U.S. crude stocks.[O/R]

Speaking at a news conference on the sidelines of PIRA’s executive energy conference, Ross said that U.S. shale producers were likely to hedge more selectively after OPEC decided to limit output, whereas previously they looked to lock in future output close to the $50 a barrel level.

Shale producers and oil-consuming companies were under-hedged, he said, adding that industrial and airline buying would support prices.

On the upcoming U.S. presidential election, Ross said, if Democrat Hillary Clinton wins, the stock market will likely rally and raise the value of all risk assets, including oil and gas.

“People are going to be relieved that Trump is not there, because of his uncertain policies,” Ross said.

Energy policy has come up only intermittently during the 2016 campaign.

This is the first time in 20 years that gasoline prices have not been a major topic of debate during a U.S. presidential election, said Jim Messina, campaign manager for President Barack Obama who also spoke at the news conference.

Source: www.reuters.com