Oil prices recovered yesterday but the API report failed to provide a factor that would maintain that positive momentum. Sellers are back on the market and unless the key DOE report changes the outlook today, oil prices could test the lows again soon.

The American Petroleum Institute inventory data for the week ending June 2nd recorded a draw of 4.62 mullion barrels. That was less than a draw of 8.7 million barrels last week but still more than the market expected (around 3.5). The report also indicated the ninth consecutive draw in the key Cushing hub (this time of 1.56 mb) showing that storage capacities are not an issue now. However, not all aspects were oil positive. Gasoline recorded a build of 4.1 mb (it was a draw of 1.7 mb last week) and distillates also registered a build od 1.75 mb. Higher products inventories could end a streak of declining oil inventories soon.

US oil inventories have been declining somewhat more that a seasonality would indicate which could be positive for prices. Source: Bloomberg, XTB Research 

While the US oil inventories are still around all time highs, this year’s “inventory path” has been very favourable, showing some effects of the OPEC deal. Then again, higher prices translate into expansion of the shale industry as we see companies adding drilling rigs week by week.

Brent (OIL) prices remain in a downward H1 trend and could test $49 zone again. Source: xStation5 

Moving to the market, we can see that there is a persistent downward trend on the H1 interval.  A lack of bullish momentum could force another retest of the key $49 zone on the Brent (OIL) market.  A break of $50.50 resistance could change that outlook.