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US crude oil prices have dropped to their lowest levels since late July. This is due to concerns about an unusually high build-up in commercial crude oil inventories. Additionally, fuel demand has been lagging behind its seasonal average, which has raised concerns about demand destruction.

According to the American Petroleum Institute's data, US crude oil stocks surged by 11.9 million barrels during the week ending November 3, significantly exceeding expectations for a 200,000-barrel increase. This would be the third-largest inventory build in the US this year if confirmed by the more definitive EIA report. Additionally, supply at the Cushing, Oklahoma, tank farm, which serves as the delivery point for West Texas Intermediate futures, increased by 1.1 million barrels.

Oil prices have faced steady downward pressure this week. This can be attributed to the vanishing Middle East risk premium and the global economic data that is showing a declining trend. The decrease in demand from China and the United States has led to hedge fund longs pulling out, intensifying the situation.

Perhaps the dagger to the heart for oil bulls was according to Kpler data, which indicates that OPEC+ net seaborne exports are exceeding forecaster expectations. Indeed, this constitutes a crucial bearish data point, potentially accounting for the sizeable visible inventory builds.

Several vital trends likewise display a softer tone, such as the softening prompt timespreads, the impact of unseasonably warm weather on oil demand, and the decline in net managed money positioning, all of which contribute to the overall weakness in the market.

So now it seems like traders are moving into " I dare you to cut more mode" after the Saudi energy ministry hinted that unilateral cuts could extend into 2024, ostensibly reflecting concerns about weaker demand.

From a macroeconomic perspective, the Saudis face enormous challenges to maintaining a price floor and incredible risks. By artificially keeping oil prices higher with China experiencing difficulties and consumers in developed countries cutting back, the possible intervention bounce in oil prices could exacerbate the issue by further reducing demand at the pump.

The fluctuations seen in oil prices make it an interesting example of an economic variable—even if we understand it, we don’t really know it.

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