We have been bearish of oil because of growing production in the US by horizontal drilling, fracking, and improvements in exploration. At the same time, we have been skeptical of OPEC's ability to maintain their production cuts in the face of massive government budget deficits of the oil-producing countries. It seems that we were correct on the first item but incorrect on the second. The net effect is to reduce the surplus of oil in above ground storage, resulting in support for the price of oil. The question is what's next.
