Crude oil is back on a supply side drive after the American Petroleum Institute (API) reports an oil supply drop, perhaps signaling that last week’s massive crude oil supply increase was a fluke! This comes after mixed data from OPEC surrounding Saudi Arabian production numbers where the Saudis reported a production increase, perhaps to send a message even though secondary sources reported that their production fell.

Source: Al Jazeera

The conflict broke oil hard as some traders thought that this was the beginning of another production war. Today the International Energy Agency (IEA) is weighing in, predicting that demand growth for oil will fall .6 million barrels a day last year to 1.4 million barrels a day in 2017, even though this agency has constantly underestimated demand. Yet at the same time, they are predicting if OPEC holds the line on production cuts, the market will be in a global supply deficit even with the reemergence of U.S. shale production. On top of that, we have the Federal Reserve Open Market Committee (FOMC) that will try to convey after an expected rate increase, the outlook and conditions for future rate increases. Is it any wonder why oil’s volatility has skyrocket? So, buckle up and keep your hands and feet in the car because oil is going to be an incredible ride.

So, let’s start with API data which is the main reason that oil is making a comeback. Last week it was the API that shocked the bulls out of their record long positions after they reported an astounding and shocking 11-million-barrel increase in supply. That number blindsided the market and caused traders to run for the exits and the market has not had an up day since. Then, after the official close, the API reported that crude oil supply this week fell 531,000 barrels. That was shocking to the bears that grabbed control of this market and now they are the ones that are running for cover. Even as the API reported a 2.06-million-barrel increase in Cushing, Oklahoma, the fact that they also reported a whopping 3.87 drop in gasoline supply and an even bigger 4.07-million-barrel drop in crude supply, it seems that despite last week’s build we are still seeing overall commercial inventories start to drop.