Priddy said he believes the market is very close to rebalancing. A global supply glut flooded the world with upwards of 1.5 million extra barrels a day earlier this year.
OPEC, inits August report Wednesday, forecast demand growth of 1.22 million barrels a day year on year, which was 30,000 barrels higher than forecast in July.
Analysts say oil could remain under pressure as U.S. refineries undergo seasonal maintenance this fall. Refiners typically reduce their need for crude oil between late August and October, as they switch over to produce winter blends.
The U.S. is also working its way through a gasoline glut that had pressured crude prices. On Wednesday, the EIA reported that there was a drawdown of about 2.8 million barrels in domestic gasoline but a build of 1.1 million barrels in U.S. crude production. Citigroup analysts said production data from both the U.S. and OPEC on Wednesday signals that OPEC is winning its market share battle against U.S. shale producers and questions the rationale behind any kind of freeze by the cartel.
U.S. oil production held steady at 8.4 million barrels a day last week, about a million barrels a day less than year-ago levels, according to EIA data Wednesday. The U.S. and Mexico have been among the biggest contributors to cutbacks that have led to the rebalancing of the world oil market, while OPEC and Russia continued to pump. There are also outages in Nigeria and Libya that have kept oil off the market but either of those countries could restore production at some point, adding barrels to the market.
Analysts mostly expect oil to head higher after the end of U.S. refining maintenance. But they disagree on how much oil could drop in the interim. WTI futures closed at $41.71 per barrel Wednesday, down 2.5 percent.
"There's some key technical numbers right around $35, and I think that's what we're going to consider before we can have a more constructive outlook," said John Kilduff, partner with Again Capital. He said the trough could come right around the time of the energy conference where OPEC plans to meet — Sept. 26-28.
"Prices will be low again, likely below $40, and the glut is going to be apparent to everyone. … I think they're going to be hysterical going into the OPEC meeting. They're going to have to do something," he said.
There has been speculation that OPEC would discuss, or perhaps launch a study of, returning to production bands if oil really does tank. Those bands dictate a range of production for each nation and move the production quota with the price of oil.
He said OPEC may not be able to just talk up the price as it has before. "I think they've gone to the well one time too many. They need to do something that will give them cover so they can cheat," he said. He explained that with a production band, there's a fixed quota, and different prices would mean different levels of production.
"I think everyone who loved to cheat loved the collective ceiling," said Helima Croft, RBC global head of commodity strategy. "This is where the accountability becomes much more of an issue. How do you give Iraq an individual quota when they've been out of the market for so long. The band idea gives enough latitude to say you can produce between X and X, and that might be a way to bring everyone together."
Kilduff said he would expect OPEC to continue as they are, even if they did agree to a band. "They weren't very good at it last time. They were like dieters around a dessert table," he said.