The US Energy Information Administration has published its weekly oil inventory data. Crude oil stockpiles rose by 2,415,000 barrels, which is a surprise compared to the expected decline of 2,031,000 barrels. Last week, stockpiles had fallen by 2,392,000 barrels. Distillate inventories increased by 1,681,000 barrels, even though forecasts predicted a drop of 598,000 barrels. On the other hand, gasoline inventories dropped by 3,795,000 barrels, which was much more than the expected decrease of 1,068,000 barrels.

Market Reactions Stay Steady

The rise in distillate inventories and the larger than expected drop in gasoline inventories balance each other out. Despite these changes, the market’s reaction to the report remained calm shortly after it was released. This report, with its unexpected increase in crude oil inventories, may hint at a weakening market. Although the significant drop in gasoline stocks is a positive sign, we think it’s a reflection of the end of the summer driving season. The market’s uncertain response indicates that traders are waiting for clearer signals before making big moves. Looking ahead, we are entering the autumn shoulder season, which usually sees a drop in refinery demand for crude due to scheduled maintenance. This seasonal trend, along with today’s inventory increase, suggests that crude prices might weaken in the near term. The recent four-week average for gasoline supplied is still strong at 9.1 million barrels per day but has begun its seasonal decline from the July 2025 peak. Additionally, broader economic data warns of potential issues. The latest ISM Manufacturing PMI from August 2025 has dipped slightly below 50, landing at 49.8. This indicates a small contraction and raises concerns about future energy demand from the industrial sector as we approach year’s end. This economic uncertainty could limit any significant price increases in the coming weeks.

OPEC Plus and Market Stability

On the supply side, we are watching for updates from OPEC+, which has a track record of influencing the market as demonstrated by their production adjustments throughout 2024. Their recent statements about maintaining market stability suggest that there might be a support level around $80 per barrel for Brent crude, making aggressive short positions risky since the cartel could implement cuts to uphold this price. Considering the mixed data and the heightened uncertainty from the active 2025 hurricane season, derivative traders might want to adopt strategies that benefit from increased volatility. Buying options, such as straddles or strangles on front-month WTI contracts, could be a smart way to prepare for significant price fluctuations. These strategies could yield profits if a Gulf storm disrupts supply and drives prices up, or if recession fears lead to a sharp price drop. This inventory report could also impact front-month futures more than later contracts, potentially leading to a “contango” market where near-term prices are lower than future prices. This suggests that calendar spread trades, like selling the October 2025 contract while buying the December 2025 contract, might be a smart move. This position would benefit if short-term weakness continues due to high inventories and reduced refinery runs. Create your live VT Markets account and start trading now.

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