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I don't have a price target for where oil will bottom out and don't really trust experts who do. The past history of the crude price is a poor predictor when the shale-driven surge in U.S. oil production has changed the global environment so dramatically. After all, it would have been unspeakable to suggest 10 years ago that the United States would produce more oil than Saudi Arabia.

The best and only strategy, in my opinion, is to use the futures curve, U.S. production and storage statistics and refining capacity to gauge "higher or lower from here."

The West Texas intermediate crude futures market is important on two fronts. First, it reflects optimism on the future commodity price, which affects producers' plans for investment in production expansion. Second, the futures curve determines demand for physical oil for the purposes of storage.

The three-year futures price (not shown on charts) has declined 55 per cent in the past 12 months, which is a sharper decline than the spot price's 34-per-cent drop. This implies that midterm optimism regarding growth in the sector is declining. By extension, it also suggests that few oil companies will be investing in production. So, future revenues for producers will decline not only because of the weak oil price, but also because production in three years will be lower than currently expected and there will be less oil to sell.

The shape, or steepness of the oil futures curve, is also an important determinant of short-term demand. When the price of the 12-month futures price rises well above the one-month futures price, this increases demand for crude. Speculators or refineries can buy oil at the one-month price, then immediately contract to sell it at a higher price in 12 months, keeping the profits.

Between September, 2014, and April, 2015, the profits available in this "storage trade" provided vital support for short-term oil demand and the WTI spot price. The popularity of the storage trade is evident in the sharp jump in oil stored in inventory.

The rise in U.S. oil production has a straightforward effect on the commodity price – more oil means lower prices, according to the immutable laws of supply and demand. U.S. production is higher than at the beginning of the year, but there have been recent signs of a "supply response," or reduction in production, that will help support the commodity price. U.S. crude production hit a 2015 peak in June at 9.61 million barrels a day, but production has since fallen back to 9.4 million barrels.

The seasonal shutdown of major oil refineries occurs in September and this process forms the biggest short-term risk for the oil price. High profit margins have had U.S. refineries running at almost maximum capacity and they've been able to soak up and process new oil supply.

Even before the weak oil markets of the past 12 months, refiner shutdowns made life difficult for the commodity price. Over the past decade, which includes periods of extremely strong energy markets, the average 6.5-per-cent decline in refinery capacity utilization in September resulted in an average 3-per-cent fall in the WTI oil price. The risk in 2015 is that an existing glut will get worse as refineries shut down and, temporarily, oil production has nowhere to go.

Refinery risks aside – and thankfully those negative effects would be temporary – there are hints that the market is slowly correcting toward some form of normality. U.S. oil production growth is finally slowing and over time, this will help alleviate the current oversupply of crude.

The WTI futures curve has been steepening of late and it is reasonable to hope that the storage trade will again become profitable, and help markets absorb the excess physical supply.

The next few weeks are likely to be volatile as refineries halt operations. After that, further cuts in U.S. production should help stabilize the WTI commodity price. But if production starts rising again, as the increasing rig count in recent weeks suggests they might, all bets are off.

Follow Scott Barlow on Twitter @SBarlow_ROB.