Considerable risk for another leg down in oil prices in the coming months

At its mid-year meeting, OPEC decided to leave output quotas unchanged, suggesting that it is committed to its fight for market share.  Both OPEC and the U.S. continue to pump out oil at elevated rates, driving the wedge between supply and demand even larger.

However, output in the U.S. should begin to ease in the second half of this year and continue falling in 2016 as the lack of investment since the price collapse begins to be felt on the production front.  While it will help to improve the market balance, it will take time to work down the massive glut currently in the market.

TD Economics says "As such, there is considerable risk for another leg down in prices in the coming months.  Overall, we suspect that expectations for an improvement in market dynamics will help to keep the WTI benchmark hovering around its current level of US$60 per barrel in the near term, before heading higher to an average of US$70 per barrel in 2016."