Sometimes I get pop ups when I am mentioned in a news article on Google or Facebook. A radio Interview that I did one year ago to the day today on the Wall Street Journal radio network, was a reminder on how far oil prices and the economy has come in just one year. Even as we fret about a recent build in oil inventory perhaps weakening the price of oil a bit, one year ago many were predicting oil at $20 a barrel and some were saying as low as $10.00. Many believed we were entering an era of perpetually low prices.

Per the podcast, oil was trading around $30 at the time and we were talking about a breaking story of Saudi Arabia and Russia agreeing to a production freeze. Those first freeze talks were a thaw in Saudi/Russia relations that had become stressed over geopolitical issues. Those issues revolved mainly around Russia’s unwavering support for Saudi nemesis Iran that was in a proxy war with the kingdom as well as causing unrest with Saudi neighbor Bahrain. While many at the time dismissed the production freeze talks as nothing, I predicted that the talks would set the stage with a move to $40. I also said that the freeze talks were the first step to a production cut that eventually happened and is the reason that oil is now above $50 a barrel.

The failed talks in Doha led to a major sell-off but I expected that at some point they would try to put the cut back together. The deal was eventually done only to have Saudi Prince Salman pull out at the last minute because the Iranian oil minister failed to show up at production cut talks. That move angered Russia and many of the OPEC delegation that thought the meeting in Doha was a colonial signing of an agreement as opposed to a negotiation. There was diplomatic damage and long-time oil minister Ali al-Naimi was fired and the new Saudi oil minister Khalid al Falih made it his mandate to do whatever it would take to get a deal done. The deal was done, setting the stage for what is a generational bottom in oil and the upside is just getting started over the next few years.

Of course, it’s hard to rally when you get another near record increase in weekly oil supply. The Energy Information Administration reported a massive 9.5 mb build even with exports of 881,000 barrels a day and oil production dropping by 100,000 barrels. Still, oil held tough! U.S. oil exports hit a record high top of 1.0 million barrels a day for the first time since the Energy Information Administration has been keeping records. U.S. oil exports are only going to increase and we will see a further drop in U.S. reliance on oil imports.

The market also knows that U.S. refineries are running at a low rate as we are in refinery maintenance season. Next month runs should ramp up and we should start to see our seasonal run-up in price ahead of the summer driving season.

The crude oil market is also wondering why the Strategic Petroleum Reserve numbers remained unchanged even as the Department of Energy announced that it had already sold over 6.0 million barrels of oil to a private concern and they announced another sale of 10 million more barrels of oil by the end of this month. We know there is mandatory reporting of inventory shifts by the oil companies but is the SPR on the same reporting schedule. At what point does the sold oil go into the commercial side of inventories? Do they report it as supply right away while the government lags? We have calls to the SPR and will report what we find out.

My point though with bringing up oil prices from a year ago, when most of the world thought we were entering an era of lower oil prices, were wrong. Instead of looking at the big picture they got caught up in the emotion of the moment. That is the same reason that if you look at the big picture globally you might be more bullish oil and look beyond the current large increases in supply, globally inventories are already falling and we know oil imports in the U.S. will continue to fall at a time when exports will rise. Demand growth by any measure in 2017 and 2018 is expected to be above average. We may see demand growth hit a record as the world may buy more cars than ever before! Demand from India and Viet Nam and across Asia should be strong and the U.S. should start ramping up as well.

Don’t worry about the so-called drop in gasoline demand. Most of that is seasonal and weather related. We expect demand growth will hit another record in the U.S. this year. The EIA said that total motor gasoline inventories increased by 2.8 million barrels last week and are above the upper limit of the average range. Both finished gasoline inventories and blending component inventories increased last week. Distillate fuel inventories decreased by 0.7 million barrels last week but are above the upper limit of average range. Commercial petrol inventories increased by 11.1 million barrels last week. Total products supplied over the last four-week period averaged about 19.4 million barrels per day, down by2.0% from the same period last year.