We're only at the start of the inventory-building cycle

WTI crude oil prices are down $1.23 today to $45.06 after another week of huge oil inventory builds.

The problem is that hardly anyone scales back production. At this point, it's clear that OPEC will pump at full capacity no matter what and fresh Iranian oil is soon to come down the pipeline.

The marginal producer is US shale but it's holding up far better than anyone expected a year ago. At the end of the day, there aren't enough buyers for oil that are using it; it's all going into storage.

October is the first month of the traditional build in oil inventories. If we were to get the same kind of build as last year, it would push inventories another 130 million barrels to storage but that just won't happen for the simple reason that there isn't that much storage available.

Instead, it will be dumped on the market at any price.

Eventually production will slow but it's barely fallen this year and is still at nearly 9m bpd.