Tis the season to get long oil as the five years upward price trajectory between mid-March and April has been solid for at least the last five years. For oil bulls, this is the most wonderful time of the year. This comes as the Energy Information Administration shocked markets with big product draws as bears hang onto the fact that U.S. oil production is rising and the one-week shock build in crude oil supply. The EIA reported that Crude inventory rose by a whopping 5.022 million barrels but that paled by comparison to the 6.271 million barrels drop in RBOB gasoline supply and a massive 4.360 million barrels drop in distillates supply. Crude production rose by 12,000 barrels to 10.381 million barrels of oil a day.

Yet, it should become very clear that U.S. oil production is not keeping pace with near record demand growth as global oil production decline rates. Petroleum could be near the most significant low since Mid-June of last year as crude oil and crude products will be tight as we kick off what I predict will be a record summer demand season. The seasonality in the last five years are very strong and while past performance is no guarantee of future results, this year should be no different, in fact, we should outperform if you look at overall supply versus demand.

Short term traders could not make heads or tails of yesterday’s very bullish Energy Information Administration supply report. We saw oil get flipped between being higher or lower on the day at least 9 times. Yet, what was stunning was that despite a big surprise jump in refinery runs, back to above 90% capacity, oil products like gasoline and distillate plunged. Yes, we had a big build in crude supply, much bigger than the API reported, yet based on demand and the counter-seasonal draws that we have seen in recent weeks that should be welcomed.

Even another increase in U.S. oil production will not offset the torrent of global oil demand growth and the fact that despite the rise in U.S. output, globally production is still falling. Not only did OPEC see its production fall because of a drop in Saudi production, not to mention the Venezuelan production crash, the lack of investment is leading to a global production decline rate of about 4%.

OPEC reported in its latest monthly report that total production by its 14 members tumbled by 77,000 bpd to 32.19 million barrels in February. The Monthly Oil Market Report for March also showed non-OPEC oil supply for 2018 is revised 280,000 bpd higher from the month’s prior forecast, representing year-on-year growth of 1.66 million bpd to 59.53 million bpd total supply.

Oil bears, of course, stay too focused on supply and forget about demand. We said when the oil market looked bleak that low prices will spark demand and it has. Even in shoulder season, the EIA has reported incredible demand. The EIA said that demand based on products supplied averaged 20.4 million barrels per day, up by 3.2% from the same period last year. Motor gasoline demand averaged a summer like 9.2 million barrels per day, up by 2.5% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, down by 4.2% from the same period last year but Jet fuel demand is up 11.2% compared to the same four-week period last year.

Think Spring. Natural gas prices are being supported by this nasty late winter, but if you look at the calendar it will not last. The EIA should show a draw of 100bcf from storage today but after that, we should start to focus on U.S. production. It should not be long before natural gas gives into spring and plummets as production will far outstrip demand.