Insights 
VT 
US crude oil inventories decreased by 6.9 million barrels last week, according to the US Department of Energy. Gasoline stocks dropped by 5.9 million barrels, and distillate stocks fell by 3.4 million barrels.
The decline in crude oil inventories resulted from a notable drop in net imports, which outweighed weaker crude oil processing. This also influenced the reduction in gasoline and distillate stocks, with stronger demand impacting gasoline stock levels.
Inventory Levels And Market Impact
Crude oil and distillate inventories are currently well below their five-year averages. Gasoline inventories are also below seasonal norms, though the difference is minor. Similar reports from the API had previously indicated marked declines, so the release of this data only marginally affected oil prices.
The recent sharp fall in US crude, gasoline, and distillate inventories points to a fundamentally tight market. With crude stocks now well below their five-year average, the supply cushion is thin. This is especially true for distillates, which are also significantly below seasonal norms as we enter the winter heating season.
Given these strong inventory draws, we see a clear bullish case for energy derivatives in the coming weeks. The decline in heating oil stocks is particularly important as November begins, suggesting prices could be very sensitive to cold weather forecasts. Traders should consider strategies that profit from rising prices, such as buying call options on WTI futures.
This tightness is happening while the Strategic Petroleum Reserve sits near 345 million barrels, a level not seen consistently since the early 1980s, which removes a key safety buffer. We saw similar worries about tight distillate supply leading into the winter of 2022, a situation that led to significant price volatility. The current setup suggests a repeat of that sensitivity is possible.
Market Strategy And Demand
Supporting the demand side, recent data showed US Q3 2025 GDP growth at a solid 2.4%, indicating consumer and industrial energy needs will likely remain firm. This strong demand is meeting constrained supply, as reports show OPEC+ has maintained its production cuts with high compliance through September 2025. These combined factors create a supportive floor for prices.
Although the market’s immediate reaction was muted because the draws were anticipated, the underlying physical tightness is now confirmed. This makes the market extremely vulnerable to any unexpected supply disruption or surge in demand. Therefore, positioning for increased volatility, perhaps through long straddles, could also be a prudent strategy.
