The last time we addressed the oil market was in early December, a month after OPEC organized a reduction of supply from its member nations in an effort to boost oil prices. That was the first successful action since the 2008 financial crisis by OPEC to boost prices.

Adding to the bullish trend for oil back then was the hope that the Trump administration's policies would be reflationary. But recently, as questions have arisen about what the administration can accomplish, the bullish trend appears to be running out of steam.

Oil markets are telling a somewhat strange story this spring. Over the last month, we've seen a sharp drop in oil prices, to the point where they were almost back to where they were when OPEC took action in November.

Why? The reason is more mundane than disappointment with Washington.

It is simply that after the initial production cut, prices rose above $50 a barrel. That enticed U.S. shale producers back into the market. Additional production in the U.S. meant that OPEC could not keep prices elevated, and once speculators realized that fact, they quickly abandoned their long positions and prices took a dive.

Taking a higher-level view, this 10-year chart illustrates how oil prices tend to fluctuate over time.While we think of oil prices as “volatile,” what seems to happen is that the price stays within a general range for months and sometimes years before it occasionally makes a strong breakout either to the upside or downside.

West-Texas-Intermediate-Oil-Price

At the end of this month, OPEC meets again to decide if it wants to extend its production cuts. Markets expect they will do so.

While that will underpin oil prices to an extent, it will not result in a breakout of prices back to the levels seen earlier this decade, when they were between $80-$100 a barrel. So we're probably going to remain within a range.

Our View: It has become clear that the days when OPEC could effectively dictate market movements are gone. Market movements are now subject to many more factors than just OPEC production levels. It is actually rather surprising that prices stay in relative ranges, considering all the factors that affect them. Despite all those factors, however, the bottom line is that the law of supply and demand still holds true: When prices make more supply attractive, it shows up.

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