WTI crude has soared through $50 (and Brent above $60) overnight after API reported a surprisingly large crude draw and helped by a plunging US Dollar and hope around US-China trade talks.

As Bloomberg reports, fears of a slowdown in oil demand are receding with an easing of the long-running trade tensions, which helped drag crude prices into a bear market after they hit a four-year high in October. Confidence is also strengthening that the Organization of Petroleum Exporting Countries and its allies including Russia will curb output enough to counter booming U.S. supplies and avoid an oversupply.

“There is positive momentum in the oil market in the new year as economic optimism seeps back in,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.

“If this state of affairs persists, OPEC and non-OPEC supply cuts that go into effect this month will prove more effectual in attenuating predicted implied global stock builds in 2019.”

API

• Crude -6.127mm (-2.7mm exp)
• Cushing +331k
• Gasoline +5.5mm
• Distillates +10.2mm

DOE

• Crude -1.68mm (-2.7mm exp)
• Cushing +330k
• Gasoline +8.066mm - biggest since Dec 2016
• Distillates +10.611mm - biggest build since Jan 2015

API reported a major crude draw but huge builds in gasoline and distillates (though the latter may have been catch-up to the official data's large builds in the prior week) and DOE confirmed the biggest distillates build in four years and a huge gasoline build, combined with a smaller than expected crude draw...

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Rig counts continue to tread water with production at record highs...

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Oil prices are up 8 days in a row - their longest winning streak since 2017 - but after this huge product build and disappointing crude draw, prices are retracing fast...

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“There is further upside to come in prices, as we see more evidence coming through that members of OPEC+ are complying with their new production cut,” said Warren Patterson, senior commodities strategist at ING Bank NV. “We see the market largely balanced over the first half of 2019.”