Crude oil stocks, which were expected to increase by 100,000 barrels this week, instead fell 4.6 million barrels. At 302.2 million barrels, oil inventories in the U.S. are below average for this time of year. For the week ending June 6, though, a quarterly backwardation of only 14 cents a barrel in the NYMEX term structure indicated oil's supply isn't considered all that tight by market participants.

Expectations about gasoline stocks were largely met by a 1 million barrel increase, though inventories are still below seasonal norms. Insiders anticipated a 1.1 million barrel uptick going into the week. Gasoline demand is still showing signs of slowing from last year's levels. According to the Energy Department, demand for motor fuel is down 1.3% from the same period last year.

Inventories of distillate fuels, including diesel and heating oil, surged 2.3 million barrels, well ahead of analysts' predictions of a 1.5 million barrel increase.

Yesterday, both the U.S. Energy Department and the International Energy Agency lowered their forecast for global oil consumption for the year, but cautioned that demand continues to accelerate in developing nations like China.

Crude oil prices were higher ahead of the U.S. inventory report as the market adjusted to some of the week's volatile trade. Over the past week, an 8.3% hike in crude oil futures prices pressured the November/December NYMEX crack spread down to $10.91 a barrel, for a gross refining margin of 8.2%. The previous week, the gross profit margin was 9.7%.

The profit squeeze was reflected in a 9.7% decline in the share price of Valero Energy Corp. (NYSE: VLO) this week. Unlike larger oil companies like Chevron Corp. (NYSE: CVX) and ExxonMobil (NYSE: XON), Valero's a pure refining play; the company isn't in the exploration and development business. Exxon's and Chevron's share prices rose 2.5% and 2.9%, respectively, over the past week.

NYMEX Nov./Dec. Crack Spread