On Tuesday, oil closed lower after it was reported that shale output in the U.S. had increased substantially. The OPEC deal continues to gain traction for the oil market. Forecast shows that there may be another surprise fall in the next stockpile report. WTI crude oil closed lower by 0.24 cents to $52.14. Brent crude oil closed lower by 0.26 cents to $55.10 per barrel.

Shale Output Rising

There already is a large widespread oil glut around the globe. The problem is that the amount of stockpiles produced must drop to sustain prices. The big issue is that shale output has increased substantially over the years. The reason being is that more oilrigs have been coming online, because the price of oil has hovered around $50 per barrel.

The Energy Information Administration — EIA — reported that May would shape up to be the biggest shale output in over two years. The U.S. Government expects shale output to rise to 5.19 million barrels per day — bpd.

Shale output in the U.S. has been steady lately, but a boost in production in one region could be the reason for the added stockpiles. This region is known as the Permian Basin, which is located in Texas. The EIA forecasts that the Permian Basin could reach record production of 2.36 million barrels per day — bpd.

That expected output is what spooked the oil market. A boost in output over normal production levels leaves additional supply. With demand lacking greatly, that would cause oil prices trade down.

Reduction on Track

What has really helped oil stay in its current trading range would be the OPEC output cuts. In the beginning of this year, OPEC had established a deal in which most nations would curb oil output. The total reduced amount for output was established as being 1.8 million barrels per day.

This was done to boost oil prices, and make sure that supplies remain suppressed. The only reason that oil prices have been doing so well is because all the pledged countries have stuck to their agreed upon cuts.

Matter of fact, the pledge is being achieved with a 100% rate. That means that no country has strayed away from their deal. What is also bullish about the OPEC cuts is that there will be another meeting in May. That meeting will discuss the topic of OPEC possibly increasing the output cuts for an additional six months.

The current deal is set to end in June, therefore OPEC meets with other nations in hopes of extending the deal. It will be a crucial step, because it will help keep oil prices elevated.

Stockpile Report

On Tuesday, analysts’ forecasted that the next U.S. stockpiles report would show a decline of 1.5 million barrels. This would be in reference to the week-ending April 14. This follows a bullish report from the week prior to that.

That is where the EIA revealed that U.S. crude inventories fell by 2.2 million barrels. These bullish reports gave confidence to the market that the oil glut situation is reducing; however, it continues to weigh heavily on all oil markets.

What Binary Options Traders Should Watch For

There are a few things that traders should watch for.

The first of which is the ever increasing U.S. shale output. As that continues to increase, reducing supplies across the globe won’t mean as much. What needs to happen is for shale output to decrease over time.

The second item would be the OPEC meeting at the end of May. If OPEC chooses to extend the deal, then oil prices could possibly trade higher. That all depends on the amount of stockpiles produced each week.

The final item that traders should keep an eye on would be the next U.S. stockpiles report. The EIA will release the next stockpile data on Wednesday morning, which should be a big indicator for oil prices will trade higher or lower.