Economic turmoil in the European Union over Greece and U.S. crude inventories coming in at almost 80-year high helped grease the skids for the oil market sell-off. While oil looks like it hit a bottom, the biggest threat to that call would be a European crisis. Deflationary pressures in the Europe have been a major factor in the oil sell off. Yet, with the EU going to quantitative easing and the rest of the world adding stimulus, the threat of deflation should diminish somewhat. But, if we get the markets fearing a Greek exit from the Eurozone, that could wipe away some of the good that the quantitative easing was supposed to do. Yet the market's reaction to the latest shot was fired by the EU declaring that it would stop accepting Greek bonds as collateral for central bank loans.

Greece's new finance minister, Yanis Varoufakis, is trying to cut a deal to restructure its debt and has urged Germany not to humiliate the country over its debts while it has dropped hints that they do not need more money and even inferred they could get chummy with the Russian Federation. Greece had been trying to play hardball but European Central Bank chief Mario Draghi seems like he can play that game. The European Central Bank abruptly canceled its acceptance of Greek bonds in return for funding. According to Reuters, the move, which means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks, was a response to what many in Frankfurt sees as the Greek government's abandoning of its aid-for-reform program. While the markets seemed concerned initially now it appears that they seem to like the tough approach.

So, if oil can rebound even in the aftermath of one of the most bearish reports in history at least by supply standards, is it possible that the market is looking beyond the glut? The Energy Information Administration added to the bearish sentiment yesterday. The EIA U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.3 million barrels from the previous week. At 413.1 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Gasoline supply also surged 2. 3 million barrels and distillates by 1.8 million barrels. So much for the cold weather! I think if we close these markets higher today that will be a strong sign that oil is at a solid bottom area.

EIA also reported that U.S. crude oil refinery inputs averaged over 15.5 million barrels per day during the week ending January 30, 2015, 288,000 barrels per day more than the previous week's average. Refineries operated at 89.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.1 million barrels per day. Distillate fuel production decreased last week, averaging about 4.7 million barrels per day.