Crude supply continues to tighten, and with distillate inventories below seasonal averages, the risk of near-term pressure on oil prices is rising.
Data released Wednesday by the US Energy Information Administration (EIA) showed that commercial crude inventories fell for a fourth consecutive week in the week ending October 23, with the decline exceeding market expectations. Distillate stocks also moved lower, while gasoline inventories unexpectedly posted a large increase, reflecting divergent trends in end-user demand.
Separately, Iran has rejected a ceasefire draft submitted by Qatar on Sunday and made clear it will not compromise on nuclear issues. At the same time, the United States has notified several Gulf Arab states through diplomatic and military channels to prepare for a "short and intense military operation" after the US midterm elections.
After the data was released, international oil prices extended gains 鈥?US West Texas Intermediate (WTI) crude futures rose as much as 3.6% to $103.51 per barrel. As of publication, it was trading at $102 per barrel.
Analysts noted that distillate inventories remain persistently below normal seasonal levels, leaving little room for diesel prices to ease in the near term, while the pace of Strategic Petroleum Reserve (SPR) releases has slowed markedly, further narrowing the market's buffer.
Crude Draw Tops Expectations as Exports Climb Sharply
EIA data showed that in the week ending October 23, commercial crude inventories excluding the SPR fell by 1.9 million barrels to 410.6 million barrels, about 4% below the five-year average for the same period.
A Reuters survey had expected an increase of 15,000 barrels, while a Wall Street Journal survey projected a draw of 100,000 barrels. The actual decline significantly exceeded both forecasts.
By region, inventories at the Cushing delivery hub in Oklahoma fell by 624,000 barrels to 27 million barrels, while Gulf Coast inventories dropped to their lowest level since December 2024.
Meanwhile, crude exports rose sharply, increasing by 1.4 million barrels per day to 4.85 million barrels per day, while net imports fell by 796,000 barrels per day.
Notably, ship-tracking firm Kpler questioned the export figures. Matt Smith, the firm's chief oil analyst, said the EIA's crude export data appears to be clearly overstated, with loadings observed by its tracking system running about 1 million barrels per day below the EIA's reported figure, "which also casts doubt on the accuracy of other items in the inventory balance sheet."
Distillate Stocks Stay Low, Leaving Little Room for Diesel Relief
Distillate inventories, including diesel and heating oil, fell by 1.5 million barrels in the week to 102.8 million barrels, about 10% below the five-year average for the same period, exceeding market expectations for a 900,000-barrel decline. Distillate demand rose by 475,000 barrels per day to 4.2 million barrels per day over the same period.
David Russell, global head of market strategy at TradeStation, expressed concern:
"Energy inventories fell more than expected, with exports taking a large amount of domestic supply. Distillate inventories remaining below normal seasonal levels means there is almost no downside room for diesel prices in the near term. The pace of SPR releases has also slowed sharply, indicating we are running out of buffers."
The SPR fell by only 100,000 barrels in the week to 282.6 million barrels, and the slowing release pace further limits the supporting effect of policy tools on the market.
Gasoline Inventories Unexpectedly Surge as Demand Drops Clearly
Gasoline inventories rose by 3.9 million barrels in the week to 209.2 million barrels, about 2% below the five-year average for the same period. The market had expected a decline of 700,000 to 900,000 barrels, a sharp deviation from the actual result.
At the same time, gasoline demand fell by about 620,000 to 625,000 barrels per day to 8.38 million to 8.4 million barrels per day.
Kpler's Matt Smith described the phenomenon as a "plunge" in demand 鈥?implied gasoline demand shrank noticeably, driving inventory accumulation. However, he also noted that gasoline inventories in the US Midwest are now at historically low levels, and regional supply-demand structures remain divergent.
Production Recovers, Refinery Runs Edge Lower
US crude production, which had been halted by storms, recovered during the week, with daily output rising by 723,000 barrels to 14 million barrels per day. Crude imports also rebounded, increasing by 616,000 barrels per day to 6.4 million barrels per day.
On the refining side, crude runs fell by 123,000 barrels per day to 16.5 million barrels per day, and the refinery utilization rate dropped 0.6 percentage points to 92.8%, slightly below 93.4% the previous week.
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