What: Crude oil continued its moody ways today, this time looking on the bright side and rebounding more than 6% to close at over $31 per barrel. That oil price enthusiasm took oil stocks along for a joyride, with Cobalt International Energy (NYSE: CIE), Superior Energy Services (SPN), Newfield Exploration (NFX), Weatherford International (NYSE: WFT), and Marathon Oil (MRO 0.31%) all jumping double digits by mid-afternoon Monday.

So what: Fueling today's crude oil rally was a report by the International Energy Agency that said U.S. shale production could drop by 600,000 barrels per day this year and another 200,000 barrels per day in 2017. With visible signs that shale production is heading lower, it could finally put a bottom beneath the price of oil. At least, that's the market's view today.  

We need to really look no farther than Marathon Oil for signs that the steep drop in the oil price is having an impact on production. Marathon Oil recently announced that its 2016 capex budget will be 50% lower than what it spent last year, resulting in total company production declining 6% to 8% year-over-year. More and more shale drillers are following this path of only investing what they can afford to spend, even if that results in declining production. In fact, it's a plan Newfield Exploration might adopt when it announces fourth-quarter earnings and its 2016 plans on Wednesday.

This significant slowdown in oil-field activity would appear to be a bad sign for services companies Superior Energy Services and Weatherford International. In the short term, that's very much the case. However, the sooner the oil industry can sort out its supply problem, the quicker it can return to some sense of normalcy, which is good for everyone involved, and it's why both stocks are rallying along with the oil price today.

Finally, Cobalt International Energy is a bit of an outlier today. It's not only moving alongside the oil price, but also its fourth-quarter results, which were reported before the market opened this morning. However, the actual numbers reported didn't really matter much to investors because Cobalt is a much different type of oil company than Newfield Exploration or Marathon Oil. It is a development-stage company, and it actually didn't start producing oil until this January, when the Heidelberg field came online. Instead, what what investors liked about its report was the progress the company made to reduce its costs and toward bringing its development projects closer to completion.

Now what: Rising oil prices tends to lift all boats, and that's certainly the case today, where oil traders are focusing on the longer-term outlook, which suggests meaningful production declines are on the way, and with that, the eventual rebalancing of the oil market. That being said, the problem isn't fixed yet, so the market's mood could quickly turn sour if it sees something it doesn't like in the days and weeks ahead. In other words, brace yourself, because it's going to be a bumpy ride.