The latest report from the EIA shows a decrease of 2,332K in US crude oil inventories, contrasting with the expected increase of 2,605K. The previous week’s figure was a rise of 4,633K.

Gasoline inventories increased by 369K, while a decline of 849K was anticipated. Distillates rose by 3,908K, exceeding the expected drop of 1,488K.

Although the crude oil draw represents positive news for the oil market, the figures for refined products suggest bearish conditions. Increased refinery activity aimed to address tighter diesel and fuel oil supplies.

A sharper decline in crude stocks than anticipated suggests a stronger pull on supply, which typically points to greater demand or lower production levels. The expectation was for inventories to grow, yet they dropped by over 2 million barrels instead. This shift could create tighter supply conditions if the trend persists. With last week’s large build, the latest figures show a reversal, but whether this continues depends on refinery throughput, imports, and broader consumption trends.

At the same time, refined product inventories moved in the opposite direction. Petrol stocks climbed despite forecasts expecting a reduction. Though the increase was small, it indicates that demand was not as strong as projected or that output ran ahead of consumption. Distillate supplies surged far beyond what markets had priced in, implying weaker demand for heating fuels and diesel or an intentional push by refiners to boost availability. Since refiners react to price signals and seasonal patterns, this jump in distillates could mean they are preparing for potential winter shortages or responding to prior supply constraints.

Much of this comes back to refining operations. Adjustments made in response to previous shortages of diesel and fuel oil have likely contributed to the shifts seen now. If processing rates remain elevated, further builds in refined stockpiles may weigh on margins. On the other hand, if crude inventories continue to shrink while refined products pile up, refiners may be forced to slow runs, affecting both upstream and downstream price movements.

The contrasting shifts in crude and products bring attention to refining decisions in the near term. Whether refineries maintain current output levels or scale back will depend on how product demand holds up and whether crude supply trends towards continued draws or renewed builds. Market participants need to watch for how these forces shape upcoming inventory reports and refining margins, as these will be key in determining potential price shifts.