Image source: Getty Images.

It was not all that long ago that oil prices were cratering, causing analysts to make dire predictions about where crude might bottom. Morgan Stanley, for example, thought crude could crash to just $20 a barrel in a bearish call made in January. However, with crude staging a remarkable comeback toward $50 a barrel, analysts and oil executives are painting a much more bullish picture on crude. Now, instead of playing "how low can you go," analysts are one-upping each other with bullish calls on crude.

Changing their tune

While Morgan Stanley was leading the downbeat chorus just six months ago, its tune toward crude has dramatically changed. It now sees crude making its way toward $80 a barrel, which is where it believes crude needs to be to fuel production growth into a market that is about to find itself short of supply.

It is not alone in its bullish assessment on oil prices. Analysts at Raymond James, likewise, see crude heading to $80 a barrel, which is what they expect prices to average next year. Meanwhile, Incrementum AG held the highest 2017 oil price target on the Street at $82 per barrel.

The supply picture has dramatically changed

Driving these bullish assessments is the view that crude supplies are going to be much weaker than expected. For example, at the end of 2015, Raymond James estimated that global crude production would average 96.83 million barrels per day in 2017. However, that view has been drastically altered by three previously unforeseen structural changes to supply.

First, Raymond James analysts see unexpected supply outages wiping out 300,000 barrel per day of production next year, likely driven by the continuation of power outages in Venezuela and the civil war in Libya. In addition to that, they see deeper global structural declines taking hold in places like Mexico, Colombia, Angola, and China, which could cause output across those countries to be 400,000 barrels per day below their assessment from just six months ago. Finally, they do not see production in the U.S. bouncing back as quickly as initially expected due to labor and equipment shortages, which could take another 400,000 barrels per day out of the picture. Partially offsetting these supply shortfalls is the anticipation that an additional 320,000 barrels per day of production will come from places like the North Sea, Russia, and Iran. When taking everything into account, Raymond James' 2017 global production average drops to 96.05 million barrels per day, which is 790,000 barrels per day less than it estimated just six months ago.

Image source: Pioneer Natural Resources, Sands Weems. 

A wildcatter's wild call

Analysts are not the only ones who see crude heading much higher. Harold Hamm, the permabull CEO of Continental Resources (NYSE:CLR), recently told CNBC that he sees crude heading to around $70 per barrel before the end of this year, which is up from the $60 per barrel call he made in January. Driving his increased bullishness is the view that the oil market started to rebalance in the second quarter, which was a quarter earlier than expected due to supply disruptions in Nigeria and Canada. Because of these disruptions, as well as declining crude production due to two years of underinvestment, Hamm said that "we'll have over a million barrels a day shortfall" between supply and demand by the end of this year. That gap is expected to widen to 2 million barrels per day next year, which would be very bullish for oil prices.

Despite the CEO's optimistic view, Continental Resources is not yet ready to put rigs back to work. Hamm has already been wrong once when his bullish bet on oil prices came back to burn the company. Instead, with oil back around $50 a barrel, the company is working through its backlog of drilled uncompleted wells and won't start adding rigs to drill new wells until oil is comfortably above $60 a barrel. That said, given Hamm's view, the company will more than likely start adding rigs before the year is out.

Meanwhile, rivals Pioneer Natural Resources (NYSE:PXD) and Devon Energy (NYSE:DVN) have already started to restock their capital expenditure budgets. After recently acquiring acreage from Devon Energy, Pioneer Natural Resources pumped an extra $100 million into its budget, which will enable it to accelerate production growth in 2017. Meanwhile, Devon Energy took some of the cash it received from Pioneer and pumped $200 million more into its capex budget. These budget increases are likely just the start, with a growing number of producers poised to boost spending to take advantage of the higher prices.

Investor takeaway

The oil market has undergone a pretty dramatic shift over the past few months. Analysts who once saw crude crashing as low as $20 now see it rebounding into the $80s in short order. This potential for higher prices is whetting the appetite of oil executives like Harold Hamm, who can't wait to put more drilling rigs back to work so his company can cash in on higher oil prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.