OPEC has some Major Problems if they cap production, US and Canadian Producers will eat their lunch

US crude oil is clearly rising again and this doesn't bode well for any move by OPEC, Russia, et.al. to cap or cut production.  It is pretty clear now that the situation for North American producers has drastically changed.  Any price support, especially any surge close to WTI $50 will result in rapid US and Canadian production increases.  It is also pretty clear that while most--including me--expected a major decline in US production towards a level well below 9MM BPD, it is now clear that 9MM BPD is the floor and US production is rising again along with working oil rig counts.  

There is a clear surge in unaccounted for oil dating back to June.  A surge in unaccounted for oil, especially a sustained one is a leading indicator that US production is rising, even though the official production number continued to show decline.  However, the official production number showed a huge 100k BPD increase last week.

US Production and Unaccounted for Oil

Data Source:  EIA

psw01 2016-8-17

Not only is US production rising, but it appears Canadian production is surging as well with US imports from Canada surging over 3.3MM BPD last week.  Comparing to last year, Canadian imports surged well over 3.3MM BPD in late 2015 and early 2016 in the face of  oil in the low $40s and $30s.  I expect more of the same this fall and winter.

Canadian Crude Exports to the US

Data Source:  EIA

psw08 2016-4-27

Those betting on a sustained rally in prices today are in for a surprise as we are heading into fall maintenance refinery maintenance season with a corresponding huge slump in demand just as US and Canadian output is surging.  That can't be good for prices.