inventories must be analysed jointly. Flow-based models that ignore stock trajectories risk overstating the imme- diacy of policy impacts and misreading the timing of price responses. In terms of refin - ing-centric demand signals, refinery utilisation, product inventories, and crack spreads should be treated as primary
Upstream production adjustment
Inventory-adjusted price response
Production cut/increase
Delayed & conditioned transmission
Inventories Strategic stocks
Absorption/ bu ering
Commercial stocks Product inventories
Response once stocks tighten
Figure 6 Illustrative comparison of production adjustments versus inventory-adjusted price response
indicators of crude demand. Therefore, in addition to the upstream supply, crude demand increasingly drives down- stream decisions via refining economics. Inventory visibility itself can influence oil markets. The transparency of the stock data can draw expectations and price curves more powerfully than opaque inventories of equal size. This makes the transparency in the inventory vol- umes a core variable in market monitoring (see Table 2 ). The table outlines a practical, inventory-inclusive moni- toring framework for oil market analysis, highlighting indi- cators that link stock dynamics to prices, refining behaviour, and crude demand. It illustrates how integrating inventory signals alongside traditional flow metrics improves the inter - pretation of market tightness, timing of price responses, and downstream demand conditions. Conclusions The modern oil market is not only shaped by how much oil is produced but also by how it is stored, released, and antici- pated. Currently, strategic and commercial inventories medi- ate the transmission of fundamentals into prices, margins, and demand. The inventory channel recognisably restores coherence between production discipline and observed mar- ket behaviour. Treating inventories as active state variables, rather than passive buffers, explains price behaviour, vola- tility, and refinery responses that appear inconsistent within traditional flow-based frameworks. It explains why price responses are often delayed or uneven without diminishing
the importance of upstream fundamentals. Thus, under- standing oil prices today requires tracking not only barrels produced, but also how these barrels are stored and how the market interprets them. References 1 International Energy Agency (IEA), Oil Market Report , Paris, various issues. 2 US Energy Information Administration (EIA), Weekly Petroleum Status Report , Washington, DC. 3 Hamilton, J.D., Understanding crude oil prices, The Energy Journal, Vol. 30, No. 2, 2009. 4 Kilian, L., Not all oil price shocks are alike: disentangling demand and supply shocks, American Economic Review , Vol. 99, No. 3, 2009. 5 Fattouh, B., An Anatomy of the Crude Oil Pricing System, Oxford Institute for Energy Studies, 2011. 6 Fattouh, B., Poudineh, R., West, R., The Rise of Renewables and Energy Transition: What Adaptation Strategy for Oil Companies and OPEC?, Oxford Institute for Energy Studies, 2019. 7 BP, Statistical Review of World Energy, London, latest edition. 8 Goldman Sachs Global Investment Research, Oil Market Outlook and Inventory Dynamics , various reports. 9 Energy Aspects, Oil Market Inventory and Refining Outlook, London. Arif A. Abdullah is a Senior Process Engineer at the Oil Projects Company (SCOP), part of the Iraqi Ministry of Oil, where he works on downstream project development, refinery systems, and process opti - misation. He holds a PhD in chemical engineering and has professional experience across refinery process design, operations, and performance improvement.
Inventory-inclusive market monitoring indicators for analysts and refiners
Indicator category Crude inventories
Key metrics to monitor Commercial stocks, strategic
What it signals
Analytical use
Buffering capacity of the system
Indicates whether supply changes will translate quickly into prices
reserves, days of cover
Product inventories
Gasoline, diesel, jet fuel stocks
Downstream tightness or
Leading indicator of refinery margins and crude demand
oversupply
Time spreads
M1–M2, front-month vs
Physical market tightness
Reveals inventory pressure earlier
deferred spreads
than flat price moves
Futures curve shape
Contango/backwardation
Storage economics and
Shows whether inventories are incentivised to build or draw Determines refinery run decisions and effective crude intake Confirms whether product signals are translating into crude demand Affects forward curves and volatility ahead of physical flows Helps detect inventory moves
structure
expectations
Crack spreads
Gasoline, diesel, and jet cracks
Refining profitability
Refinery utilisation
Throughput rates, maintenance
Demand transmission strength
activity
Strategic inventory
SPR release/refill announcements
Expectation management
signals
Opaque inventory proxies Import trends, storage
Hidden stock changes
estimates, and port congestion
not visible in official data
Table 2
87
PTQ Q3 2026
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