Crude oil prices pulled back from the big psychological resistance of $50 per barrel as the overbought market was met with reports of rising OPEC oil production and a surprise increase in U.S. crude oil supply as reported by the American Petroleum Institute (API). 

Yet, despite an increase to its highest level of the year, OPEC compliance to its targets improved, according to Reuters, as the bulk of the increase came from Libya--with no OPEC quota--raised production as Saudi Arabia and Angola lowered production. Reuters reported that OPEC oil increased by 90,000 barrels per day (bpd) to a 2017 high. That put compliance at 84%, according to Reuters, which is up from a revised 77% in June; but below the 90%, Reuters saw earlier in the year.

Reuters has been the toughest grader of OPEC cuts but others also are showing a similar increase in OPEC output. This comes as OPEC is going to meet to improve compliance Aug. 7 and 8, in Abu Dhabi, which according to some was, at one point, 105%. Regardless, the fact of the matter is, even with the cheating, this is the best compliance the cartel has ever had. Is it good enough? Well, a historic decline in U.S. crude stocks suggests it is going in the right direction. 

The API shocked the market even more by reporting a 1.779-million-barrel crude oil build and a surprising Cushing, Okla., build of 2.562 million barrels. This was way out of whack with market expectations and raised questions because of an almost impossible drop in crude oil processing rates. Did we shut down a bunch of refineries last week? The API also reported a whopping 4.827 million barrels drop in gasoline supply suggesting strong demand or a crash in production and a drop-in distillate of 1.225 million barrels. The numbers don’t seem to jive but if we see a build in today's Energy Information Administration data, we could see some further correction.

RBOB gasoline futures is the strongest. Gas demand figures have been blowing away expectations in recent weeks putting to rest the false narrative that the US has hit peak gas demand. Still, weak car sales figures sometimes is a fore-runner of weakening gasoline demand, so we will have to continue to watch. U.S. miles driven must be back on the rise so I expect that the gasoline demand numbers will be making up for lost time.

Distillate demand has also been strong. Great refining margins and an active export market is giving the market a boost. That demand is probably indicative of a thriving US manufacturing sector, a positive for people who like to see an expansion in U.S. high-paying jobs. 

These demand numbers are the reason that the International Energy Agency and OPEC has had to raise its demand forecast once again. Reuters reported that forecasters, including the International Energy Agency, have been raising their estimates. Oil company BP was upbeat, seeing demand growing by 1.4 to 1.5 million barrels per day (bpd).