"Well, so much for the oil bears, at least for now," Dietz told BloggingStocks Tuesday. "Seriously, today's price surge shows you how volatile this market is, given the small safety cushion between global oil supply and demand. It doesn't take much to send this market higher, even on a reversal." Dietz added that he was stopped-out for a loss, with monthly oil-short contracts. He currently has no positions open.

Dietz said three factors contributed to oil's record surge Tuesday: a fire at an Alon USA Energy (NYSE: ALJ) refinery near Big Spring, Texas, persistent talk of an OPEC production cut in March, and a batch of new investors seeking quick gains.

"Of the three, the biggest factor clearly was OPEC. There were persistent comments that OPEC remains concerned about building supplies heading into spring. The market seemed to look past all of the evidence that suggests lower demand, and it saw only lower supply from OPEC with a tight [global] safety cushion and that was enough to get prices to rip," Dietz said. "But there also was a lot of 'late money' in today's rally." 'Late money' refers to hedge and other investment funds who suddenly buy long positions, hoping to make a quick profit, sometimes within hours.

$100 psychological resistance breached

Deitz said Tuesday's activity sets up key sessions for the remainder of the week.

"We've breached the major psychological resistance of $100 again, which is bullish, obviously. Still, we need to close above it for three days in row for the trend to remain bullish, from a technical standpoint, and that's going to be hard to do," Dietz said. He said the current market "is a classic case of the analytics saying one thing, but market psychology saying something different."

"Almost all the fundamentals point to slowing demand growth, due to a slow U.S economy but when the market heard [Iran Oil Minister Gholam] Nozari say it's normal for OPEC to cut production in March every year, that put nearly everyone in buy mode," Dietz said.

OPEC ministers have repeatedly said the oil market is well-supplied, arguing that oil's rally to near-record $100 highs is primarily due to an influx of speculative money and political tensions in the Middle East.