Oil traders turned buyers in early morning trading Wednesday, driven by book squaring ahead of the U.S. Energy Department's oil inventory report. Apparently, traders had already discounted analysts' calls for a 2.5-million-barrel build in crude oil stocks.

Inventories, in fact, increased nearly three times faster than expected, growing by 7.2 million barrels from the previous week. Refinery runs, too, surprised Oil Patch bean counters by increasing 1% despite notions that more capacity would be idled.

The government-reported build in gasoline inventories fell short of expectations, though. Motor fuel stocks inched up by 300,000 barrels, a half-million barrels shy of forecasts.

Distillate fuel supplies, including diesel and heating oil, fell by 1.4 million barrels, fairly close to industry guesstimates.

The slow build in gasoline stocks has been reflected in the narrowing of the gasoline/heating oil spread (see "Energy Spreads Offer Leveraged Profits, Reduced Risk"). Over the past week, heating oil's premium was pared by more than 3 cents per gallon.

Futures-implied refining margins widened more than 1 percent to 32% over the past week, largely because of strength in gasoline prices. Crude oil input costs fell 1.9% over the week as heating oil prices dipped 2.6%.

NYMEX-Derived Refining Margins

Crude oil ended higher in overnight trading after an initial slump. Upside momentum built in the early morning hours ahead of NYMEX floor trading and the imminent government oil inventory report.

Technically, crude oil remains weak, though a base is being built in the mid-$30 range. Upside momentum would likely be accelerated if spot NYMEX crude manages a close above $43.16.

NYMEX Spot Crude