Shale oil is becoming increasingly important in the global energy market, but its accumulation mechanism is not fully understood. We present novel and direct fluid inclusion data from the Lower Permian Fengcheng Formation, Mahu Sag, Junggar Basin, northwest China. Shortite veins in this source rock contain abundant two-phase gas-liquid hydrocarbon inclusions and coeval aqueous inclusions. The inclusions have highly variable degrees of bubble filling (5–80 vol% vapor) and homogenization temperature differences between oil and aqueous inclusions (~50 °C), which demonstrate that fluid (oil-gas-water) immiscibility occurred at high pressures. The hydrocarbon inclusions record different levels of fluid over-pressure (32.9–43.0 MPa), with a paleopressure coefficient of 1.3–1.7. Episodic fluid over-pressure release resulted in shale oil accumulation, with faults/fractures acting as important migration pathways. Oil from deeper and more mature source rocks within the Fengcheng Formation was expelled upward to the shale oil reservoir. These processes are common and important in shale oil systems. These results show that the accumulation of unconventional hydrocarbons occurs pervasively within the reservoirs, and fluid displacement is critical in exploration and exploitation.