Oil prices rose on reports that the Russian Oil Minister said that a “critical mass” of oil producers had agreed to freeze production. But will it be enough, with U.S. oil supplies continuing to rise?

Oil traders got a late afternoon shock when the American Petroleum Institute (API) reported a shocking 9.9-million-barrel crude oil build that was far beyond anything on anybody’s radar. This comes as the International Energy Agency (IEA) warns that even with a freeze by major oil producers, supplies of oil may continue to grow.

Yet economic optimism in the stock market and a sense that maybe things are not as bad as some had feared may actually increase demand expectations and shorten the time when the market archives the so called proverbial “balance”. Of course that may be harder because we also have a ‘critical mass” of oil supply.

The International Energy Agency says that it looks like oil prices have bottomed out, but don’t look for a sharp increase in prices. The IEA says oil supply is still expected to rise through this year, but oil investment cuts will help to reduce a supply glut. Reuters reported that Neil Atkinson, the new head of IEA's oil industry and market division, told a seminar in Oslo that "Prices are expected to grow throughout 2016 and into 2017, reflecting expectations that the market is going back into balance in 2017. If the U.S. producers were to "remain longer in the game", the market's rebalancing could be pushed back by one year to 2018, Atkinson said. " As soon as oil rises to $40-50 per barrel, it will give a signal to light tight oil producers (to ramp up)," Atkinson said.

Well I guess that is assuming they are still in business.

Of course the glut got larger assuming you believe that API and that 9.9-million-barrel build. Gasoline, on the other hand, remains supportive, as the API reported a 2.2-million-barrel drop. Distillates rose 2.7 million barrels on the winter thaw and Cushing Oklahoma oil stocks increased by 700.00 barrels.

If the EIA report is not as bearish as API, look for oil to resume rally! Oil then will follow stock, instead of the other way around.