Oil prices are gaining Wednesday morning, with WTI up over $53 per barrel and Brent crude up over $55 per barrel. The commodity is trading in the green on market optimism that key OPEC oil producers will keep to their deal to reduce output in 2017.

Demand for oil is expected to increase in the first half of 2017, with the top end of Citi's forecast at $70. BloombergTV's "Bloomberg Daybreak: Americas" anchor Jonathan Ferro asked Path Trading Partners co-founder Bob Iaccino about what kind of market we'll need to see for oil to hit $70 per barrel.

"I think that would be sort of a utopia of demand to get to $70," he responded. "I think that's part of the story... we're pricing in a very, very rosy view on demand and I'm not sure that comes to pass. When you talk about a fiscal stimulus, that could be part of it."

The pullback in drilling regulations and how much, if any, stimulus is given back to the companies in terms of tax breaks on a general basis will play a role in seeing oil hit that mark.

"But the demand side of it won't play out in 2017, at least not until late in the fourth quarter, I think. You're also talking about, there's been a lot of talk in the actual production industry about China building up a strategic reserve. Some of the people I talked to say they're done with that. So I think we might have some demand surprises," Iaccino explained.

In terms of supply, Iaccino expects a wash in supply in the third quarter. He believes U.S. produces have enough room to hedge but there are some "pockets of backwardation."

What about a rise in U.S. production?

"Well, I'm definitely looking for a short term bullish scenario," Iaccino said. "But here is the thing: People were talking 12, 16 months ago about shale producers turning the spigots back on, they were not able to do that then. They had huge staffs, huge salaries to pay out, capital investment they had to work through. They have leaned out."

Some of the estimates Iaccino has looked at, in terms of cost per barrel between technology and cost price production cuts that they've made, are 15% to 20% lower costs per barrel.

"There are some shale drillers now that can make money at $28. Now we're in a position for the current wells, and we have seen at least a steady rise in wells that have been open and the Friday numbers that we get from Baker Hughes. (BHI) We're going to see a steady increase in production where now the current shale drillers can actually turn production back on, and a lot more quickly than they were able to 18 months ago," Iaccino concluded.