The past week has been a good one for OPEC. The cartel trumpeted its oil production cuts on Wednesday, saying that it had made 90 per cent of the promised cuts and that non-OPEC members had made 60 per cent.

This is borderline shocking given that the Organization of Petroleum Exporting Countries is well known for cheating its own quotas. There are estimates that around 1.2 million barrels per day of production has been cut from world supply as a result of this deal, and it has had the desired effect, with oil prices rising to above $54 US in North America.

U.S. producers are taking full advantage of the uptick. American production last week topped nine million barrels a day for the first time in 10 months, up a half million barrels per day since September.

And that really sums up the tug of war between the U.S and the oil cartel. It shows that OPEC doesn't really control the oil market any more.

"The last week OPEC has been successful at boosting market psychology and boosting confidence that their cuts will have an impact on the supply glut," said Jim Burkhard, head of global oil markets research with IHS Energy.

"But with every OPEC action, there is a reaction. It may take time, but in the months ahead the reaction will be growth in U.S. oil production."

Saudi oil privatization move

OPEC, for its part, has a lot at stake with these cuts, but there are questions about how far it will go to goose prices.

Saudi Arabia is taking its state-owned oil company Saudi Aramco public in 2018. The higher the price of oil, the more Saudi Arabia will gain from the market offering. That is considered one of the key factors driving the Saudis right now.

"I don't think that it's just that one issue. Over the course of the last two years we saw that 2016 pricing isn't sustainable for anyone," said Jackie Forrest, director of research at the ARC Energy Research Institute.

ARC Energy Research Institute's Jackie Forrest says it will take all of 2017 to use up surplus oil in storage. (Kyle Bakx/CBC)

"We saw publicly traded companies lose money every quarter, and countries in OPEC didn't have enough money to pay their bills, and it's just not a sustainable price, and that's what led to the capitulation that we saw and OPEC agreeing to make a cut."

At the time of the cut, the oil market was not in balance, but it is now running a deficit, in which more oil is being consumed than produced. The price of oil has traded in a fairly tight range just above the $50 US mark because of concerns about U.S. production and the sheer amount of oil being held in storage around the world.

Where U.S. oil production is heading

"The oil market is still not in great shape," said Forrest. "Storage tanks around the world are filled to the top and we still have to get that storage level down before we start to see prices move up substantially. And so it could be the course of this entire year and we still won't have those storage levels back to more normal levels."

The question is what will happen with U.S. production. Its most recent peak was in the summer of 2015, at 9.6 million barrels per day. That production slid for the next 12 months, eventually bottoming out at 8.4 million barrels per day. It has since jumped to nine million.

With U.S. President Donald Trump easing regulation in the energy sector and actively encouraging more production, it's expected that U.S. numbers will continue to rise this year. Burkhard thinks U.S. producers will add a further 600,000 barrels per day to production, bring them back to recent peaks.

How OPEC will react to U.S. supply

Since it was U.S. production levels that caused the market share war in the first place, it raises the question of how Saudi Arabia and other OPEC will react as U.S. production heads higher.

"OPEC's market share, especially Saudi's, they did increase it over the last two years," said Burkhard. "So they could sacrifice some and still be above where they were in 2014."

The cartel has only committed to these production cuts for six months and will meet in spring to decide its next moves.

"It is going to be a real question," Burkhard said. "Especially because U.S. production will be rising at that time. Do they feel that they need to cut again? The price environment in the week or two before the meeting will have an outsized influence on what is decided."