Has oil found a bottom?

After two days of rising, and breathless pundits extolling "the largest rise since 2009", headlines pondered whether we'd found the bottom of oil prices.

I would say, in short, "No".

Why?  Well, for one thing, the rise started on month's end, when shorts were covering after a not-as-bad-as-might-have-been earnings.  The next day had a mixed report from Exxon, along with some stress in the Mid-East, and a softening of Syriza's tone in the EU.  No solid reasons at all, really.

Second, storage reports weren't out then, but they are now, and stocks are higher than "anytime in the past 80 years", and still going up.  China is easing money supply to keep their economy growing (again, how can EVERYBODY hope to shore up their exports?). 

Third, everybody is still hopeful that things won't get all that bad.  Usually, with big market shift, tops are found right after everybody becomes an optimist, and bottom occur after the last bull capitulates.  We aren't there, yet.

There are positive signs, like the majors cutting investment quickly, and the fact that US production was flat this week (actually down just a tad), but one week does not a trend make.  We need to see the four-week average to tail off significantly, and the world production to follow.  We need stocks to flatten and start to drop.  We need the futures chain to flatten and move from contango.  We need floating storage to stop growing. 

Rig counts are way down, and that's a good sign -- the faster we cut, the faster the recovery.  If they are committed to protecting their market, KSA should want to see a financial rout, not just a drilling rout, else the rigs will stand up again quickly.  They should want to see bankruptcies and financial blood flowing in the streets. 

Of course, instability in the Mid-East or a larger war with Russia could tip things sooner, but that is unlikely to happen.  The best case is for the north sea to cut way back, and deepwater in general, and the higher-price shale plays to drop.  Most likely we will see several mid-size and many small companies fold entirely, and the healthier companies pick up some fire-sale assets.

Me, I'm still thinking we have 3-6 more months of volatility before the bottom proves out.