Having surged overnight on the heels of a huge API-reported crude draw (don't forget the seasonal incentive to lower taxable inventories), WTI Crude has quickly faded back this morning (despite dollar weakness) as OPEC data this morning suggests a deeper supply cut may be needed in late 2019 to balance world markets.

As Bloomberg notes, even if OPEC cuts as planned, a surplus will re-emerge in late 2019...

Traders remain concerned that record American oil production and shaky fuel consumption could foment a new glut.

“The agreed production cuts will not be enough to ensure sustained and immediate recovery in oil prices,” consultants at Oslo-based Rystad Energy ASsaid. “However, the decision does stand as a Christmas gift to budget-setters in the U.S. shale industry, where the relentless growth in production is set to continue also for the second half of 2019 and beyond.”

API

• Crude -10.18mm - biggest draw since July

• Cushing +642k

• Gasoline -2.48mm

• Distillates +712k

DOE

• Crude -1.21mm (-3.5mm exp)

• Cushing +1.148mm (+1.1mm exp)

• Gasoline +2.09mm (+2mm exp)

• Distillates -1.475mm (+1.6mm exp)

After last week's huge draw, DOE reports a considerably smaller than expected 1.21mm barrel crude draw and a surprise distillates draw.

Production has been flat at record highs for the last few weeks (remember only moves in 100k increments now) but slipped lower last week...

WTI hovered around $52 ahead of the DOE data (at the top of the immediate API spike overnight) and slid back below it on the smaller than expected draw...

Finally, we note that Bloomberg's Benjamin Dow points out that there is some notable risk for the crude shorts from EIA data (as seen in a pattern that occurred five years ago) - seven straight stockpile drawdowns beginning in late November helped the WTI price climb for 10 out of the next 13 weeks in December through February 2014.