Is it time to play it safe? The Saudi oil minister Khalid Al-Falih said the safe bet coming out of the OPEC meeting today is a 9-month extension of the current 1.8 million barrels a day of OPEC and non-OPEC production cuts, yet the safe bet might not wow oil traders.

Talk of an extension of a cut for 12 months and even rumors of a deeper cut, seem a bit less likely even as Russian oil minister Alexander Novak seemed to suggest they are open to an extension of cuts. Yet the declaration that a nine-month extension would "do the trick” to reduce global supply is causing a bit of a sell-off. Even though the Saudi oil minister is probably right that a 9-month extension of cuts will do the trick, the markets, in the short-term, do not like it when the cartel plays it safe.

The evidence that current cuts are starting to work is becoming evident in U.S. oil inventory numbers. The Energy Information Administration (EIA) reported that U.S. crude supply fell by 4.432 million barrels las week including a big 787,000 barrel drop in Cushing, Oklahoma. 

This came as U.S. exports fell and U.S. oil demand surged. The EIA said that U.S. crude oil refinery inputs averaged 17.3 million barrels per day, a million barrels a day higher than a year ago running at 93.5% of their operable capacity last week. Gasoline production surged to a whopping 10.2 million barrels per day. Distillate fuel production also jumped to an impressive 5.2 million barrels per day. The surges in U.S. demand offsets even another impressive increase in 15,000 barrels a day seems a bit small when you compare it to demand.

Still, regardless of what OPEC does, even though it is only starting to work, you must admit they have done their best job of compliance in history.

The EIA releases its big natural gas report today! We are looking for a 70 bcf increase. Still, wait for production numbers. If we fall below 70 bcf a day, we could see a big rally.