Crude oil is rocking again as the ultra-bearish arguments are falling to the wayside. Better than expected data out of Europe, a crude draw reported by the American Petroleum Institute and Saudi oil selling prices are reflecting better-than-expected demand and lower U.S production. Add in some geopolitical worries with strikes at the Ports in Libya and ongoing air strikes in Yemen and the market looks dynamic.

We have been saying since February that low prices would cure low prices, we started to look beyond the glut. With a historic drop in U.S. rig counts, billions of dollars in Cap-x cuts, and the impact of quantitative easing in Europe and the rest of the globe would set the stage for a bottom. That bottom looks clear now on both the monthly and daily charts and barring any major economic setback or a surprise larger than expected build in the Energy Information Administration report we should continue to move higher.

Let's start with yesterday's icing on the cake. The API, in its now closely guarded secret for subscribers- only report, said that U.S. crude supply fell by 1.5 million barrels. While we predicted a drawdown of 2 million barrels in crude supply, most people did not. Expectations were for a 3 million barrel increase.

In Cushing, Okla., the drop came pretty close to our estimate falling by 336,000 barrels. If the EIA agrees with that, then that would be the second consecutive drawdown. While it is relatively small it still is significant because one of the ultra -bears arguments was that Cushing was on a one way track of everlasting supply increases until it was overflowing with supply that would then cause a fire sale on oil. Yet if supply falls than maybe that scenario is wrong.

I pointed out that oil was in a counting for a reason. Usually the market is not going to pay someone a huge premium to store oil unless the market thinks that that oil would be sold at a huge loss later. Usually the deep counting signals that even though in the short term there may be plenty of supply you had better watch out down the road. Now with many, like David Einhorn, attack fracking and the lack of investment confidence in the industry will mean tighter supply in the future. Especially if we get a boost in demand from Europe and Asia. 

We also saw support as the hoped-for bombing halt never happened. Reuters reported that planes from a Saudi Arabia-led coalition struck Yemeni towns overnight, following mortar attacks from Iran-allied Shi'ite Houthi rebels. In Libya, protests have stopped crude flows to the eastern port of Zueitina. Libyan output is currently below 500,000 barrels per day, a third of what the country pumped before 2010