Oil extended declines as traders digested multiple indicators of weakening demand, ample supply and braced for more clues from Federal Reserve officials on the path for interest rates.

Global benchmark Brent dropped more than 2% on Wednesday, briefly dipping below $80 a barrel for the first time since July, before clawing back some losses. As the risk premium from the Israel-Hamas has faded in recent weeks, traders’ focus has shifted to demand, which has shown signs of softening. 

In China — the world’s biggest crude importer — refining margins are shrinking, oil and fuel stockpiles are swelling and air travel still has yet to rebound sharply. In the wider economy, business and consumer confidence remain low despite government efforts to juice growth. 

Meanwhile, on the supply front, Russian shipments are running near a four-month high, while industry data showed US crude stockpiles increased by almost 12 million barrels last week. The US benchmark’s prompt-spread is also signalling signs of ample supply as the premium for near-term contracts collapsed. Prices for barrels for December and January delivery are negligible now, compared with the $1.75 premium traders were paying last month. 

According to an industry report, stockpiles at the largest US storage hub increased by over 1.1 million barrels. If confirmed, that would be the biggest increase since June. The Energy Information Administration won’t publish official data on Wednesday, releasing two weeks’ worth on Nov. 15.

In the US, government data indicate that American gasoline demand will fall to a 20-year low next year on a per-capita basis, with prices at the pump and inflation likely reducing discretionary driving.  Meanwhile, Fed Chair Jerome Powell is leading a raft of US central bankers speaking at a conference in Washington on Wednesday, potentially providing signals on the path for interest rates.

“The focus is clearly shifting from undersupply to weak demand, and central banks insisting that rates must remain high could further exacerbate that,” said Craig Erlam, senior market analyst at Oanda.

However, OPEC+ said it was still positive on the demand outlook as it prepares for its next ministerial meeting. Saudi Arabia and Russia may decide whether to extend voluntary supply cuts into 2024 at the gathering in the final weekend of November.