The latest weekly API inventory data for the week ending May 5th reported a draw of 5.79 million barrels. This was a substantially larger draw than the consensus forecasts of around 1.8 million barrels and followed the 4.16 million draw seen last week, although the official data recorded a much smaller draw.

Distillate registered a draw of 1.17 million barrels after a draw of 0.44 million the previous week. In contrast, gasoline recorded a significant build of 3.17 million barrels following the draw of 1.93 million barrels last week. Cushing recorded a draw of 0.13 million barrels which was the fifth successive draw for this metric.

The positive impact from a larger than expected headline inventory decline will be offset to some extent by the increase in gasoline inventories.

Wednesday’s EIA inventory release will be important for sentiment, especially as increasing US shale production is continuing to complicate OPEC efforts to rebalance the market. A substantial draw will be needed to boost underlying sentiment. Gasoline data will also be an important element, especially after the API reported a significant build for the week.

 Oil WTI remains within the downward channel and fails to break above the broken support. That is why the technical outlook remains bearish.