PTQ Q3 2026 Issue

Physical absorption

Throughput optimisation

Market impact

Crude imports & domestic supply

Inventory accumulation / drawdown

Rening system integration

Trade ows & product exports

Observed market signals

Export arbitrage

Delayed visibility

Misread demand signal

Figure 4 China’s realised balance channel: inventory accumulation, refinery integration, and delayed market visibility

Eective crude demand & price response

Crude & inventory conditions

Rening economics

Product market balances

Crude supply balance SPR & commercial inventories Stock levels and stock changes

Renery utilisation Crack spreads Throughput and slate optimisation

Product inventories Export availability Regional tightness or surplus

Margin feedback from product inventories

Figure 5 Refining and product markets as the final transmission mechanism of the inventory channel

utilisation, which ultimately weakens crude oil demand. Tight stocks, on the other hand, strengthen margins, stimulate higher runs, and accelerate crude draws. These downstream feedback loops serve to explain why upstream discipline does not always translate into immediate price recovery. Therefore, not only crude balances, but also product mar- kets increasingly determine whether supply cuts count in the short term. Together, they demonstrate why price stabilisa- tion is increasingly dependent on product-market conditions and stock trajectories, not just upstream supply discipline. This would set the stage for a reassessment and evalua- tion of Organization of the Petroleum Exporting Countries (OPEC) policy effectiveness (see Table 1 ). The table illustrates the directional relationships between product inventory levels and downstream refining behav - iour, highlighting how crack spreads and refinery utilisation adjust under different stock conditions. It shows how product

market dynamics condition effective crude intake and can either amplify or dampen the transmission of upstream sup- ply changes into observable demand and price responses. Production cuts can stabilise long-term balances while producing muted short-term price responses. This is because inventories can absorb adjustments in crude supply. Several mechanisms contribute to these muted responses. Ample stocks can absorb supply reductions, anticipated SPR actions cap forward prices, refining margins limit crude demand, and delays between upstream adjustments and downstream tightening are features of these mechanisms. Thus, prices tend to respond decisively only once inventories reach levels where buffering capacity is exhausted (see Figure 6 ). Analytical implications for market monitoring The inventory channel has important implications for oil market analysis. For flow and stock integrity, production and

Indicative relationships between product inventory levels, crack spreads, refinery utilisation, and crude intake

Product inventory condition

Crack spreads

Refinery utlisation

Crude intake/

Market interpretation

demand response Weak or declining

High/rising inventories

Compressed

Reduced or capped

Product oversupply dominates; downstream limits crude demand despite upstream conditions Market in equilibrium; crude demand responds slowly to upstream signals Product tightness amplifies crude demand and accelerates inventory draws Scarcity-driven demand; high

Moderate/stable inventories

Neutral to balanced

Stable

Flat to marginal growth

Low/falling inventories

Strengthening

Increasing

Rising

Critically low inventories

Elevated/volatile

Maximised

Strong, price-sensitive

(subject to constraints)

responsiveness to supply disruptions

Table 1

PTQ Q3 2026