Oil prices punched their ticket higher out of the gates this morning on the global grand reopenings and faster than expected supply curtailments.

While price action is bound to be choppy as economies try to move out of lockdowns, it is probably safe to say that traders have planked a base on oil prices after WTI moved + 5.1 % on Friday, ripping 25 % higher on the week.

They notched their first back-to-back weekly gain since February amid optimism surrounded by global production cuts that are eroding the massive supply glut.

Oil fundamentals are showings signs of improvement by the week, likely accelerated by the recent historic collapse in prices, which is causing a massive reduction in US oil production.

The number of US rigs drilling for oil fell to a level not seen since before the shale-oil revolution kicked off at the beginning of the last decade. Excellent for oil bulls but not for the industry or the US economy as a whole.

Supplies have started to decline quickly and with many countries in the West attempting to reopen their economies, it should bring supply and demand equilibrium into more standard terms.

But even now, some traders are bullishly positioning for the ultimate inflection point, a more rapid reduction in US inventories, and even a possible deficit in Q2 a concept that was unfathomable only a few weeks ago.

With the oil prices rebalancing at a much faster pace than expected, as evidenced by price action, which suggests markets are quickly moving from a relief rally to cyclical tightening, setting the stage for structural repricing higher as storage capacity issues are getting relegated to a rear window concern.

With peak supply, a distant memory and US transportation demand set to surge post lockdown. So, with supply and demand factors shifting favourably for oil prices in opposite directions, the laws of economics suggest prices have nowhere else but to go higher.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp