Even with the recent rebound in the price of crude oil, don't look for production cuts to stop. Oil is breaking out as it is clear that crash in oil prices significantly changed the fundamentals and the future production growth curve.

Even "big oil" companies like Exxon Mobil, Shell and Total, whcih had an earnings surprise to the upside, did so in part by making money on refining and other parts of their integrated business' by slashing spending and continued capital spending cuts. Cuts that in some cases may not stop some of these companies from increasing output, but will reduce dramatically the expectations of where many thought we would be before oil prices crashed.

Exxon Mobil saw an increase in output but cut capital expenditures by 9% and sold $4 billion of assets after the price crash. What is more they are not done. This year they are going to cut spending by another 12%. Chevron says they will cut spending by an additional 13% and that they plan to sell $15 billion worth of assets through 2017, after selling. Hess, another energy company, cut capital and exploratory expenditure by $300 million to $4.4 billion. 

Today, this will be expressed in part by the Baker Hughes U.S. rig count number. Last week the U.S. oil rig count falls for the 20th week in a row as the oil rig count dropped by 31 rigs. That is down to only 703 active rigs down from 1600.

Oil is also getting support from wondering just what is going on in the Kingdom of Saudi Arabia. The Saudi Arabia's Supreme Economic Council has approved a restructuring of Saudi Aramco that includes separating it from the oil ministry. The new Supreme Economic Council is a body formed by King Salman earlier this year to replace the Supreme Petroleum Council kicking out Saudi Oil minister Ali Naimi's inner circle, which used to help set the kingdom's oil policy.  Naimi is getting isolated!