Oil prices were collapsing earlier this year, but they’ve since rebounded nearly 60% from their February lows. Is the price going to keep rising?

Personally, I don’t think so. I think the price is likely to fall back down towards the recent lows, although probably not that low again.

But in any case, I expect the oil price to remain quite volatile as economics, technology, geopolitics and finance combine to provide an unstable supply and demand picture for crude.

Behind the recent rally has been a remarkable turnaround in speculative positions. So far this year, hedge funds and other investors have more than doubled their net long position in oil futures and options. It’s now approaching the record set in June 2014, when it looked like ISIS fighters might take over Iraq.

As you can see, not only were investors accumulating long positions, but they also closed out over half of the record short positions that they held. It was this short-covering really that pushed oil prices up.

The question is, what will cause investors to continue to close out these short positions or to buy more contracts? This is where it gets difficult.

True, there has been some decline in global production. That’s because of several disruptions to supply, such as malfunctions at a Venezuelan export terminal and a pipeline bombing in Nigeria. And there’s been some hope that OPEC and the major non-OPEC countries would agree at their meeting in Doha on April 17th to at least freeze production, if not cut it back.

At the same time, demand out of China and India has been strong, with both countries importing near record amounts of crude and products in February.

But there’s one big problem overhanging the market: the global inventory overhang. The whole world could stop pumping oil for a week and that would only bring inventories back to their normal level. And we all know that’s just not going to happen. On the contrary, the US Government’s Energy Information Administration expects that global inventories will continue to rise this year and even next year.