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A week after the Saudi bid to surprise the oil market, traders are indeed surprised over how far it is going in opposite to Riyadh's wishes.

Crude prices tumbled as much as 4% Mon in a takedown that sent WTI crude nearer to its USD65 support, and the global benchmark Brent to almost USD70.

The Saudis need Brent to be at USD80 at least (which means WTI has to be at USD85 or more, given the minimum USD5 premium for the global benchmark) and have offered to take 2.5 m barrels off their regular daily production of 11.5m via three cuts announced since Nov. Last week, the Saudis offered their latest cut of 1 m bpd.

Over the past 6 months, Brent briefly crested at USD87 before returning towards USD70 support on several occasions. WTI's highest has been USD83 plus versus lows of beneath USD64 at one point.

Even Wall Street's biggest bull - Goldman Sachs - cut its forecast for Brent on Mon, announcing a Dec average of USD86 versus a previous USD95. For WTI, it called a barrel at USD81, down from USD89.

Technical charts are showing a bigger drop likely. "Oil bears have been eyeing the 100-month Simple Moving Average of USD59.60," said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.

John Kilduff, partner at Again Capital, adds:

"The Saudis are keen to show their ability to positively surprise this market. Instead, what the longs in oil are getting these days are more negative surprises, sometimes those that are right down nasty."

One of those emerged on Mon when WTI crude for Jul delivery settled down 4.4% at USD67.12 after a session low at USD66.83. Brent crude finished Mon's at USD71.84, down almost 4%.

Oil's latest tumble on Mon came ahead of key inflation data and a Fed decision that could set the direction for risk-taking across markets.

On Wed, the Fed's policy-making committee is expected to vote for a break from a rate hike campaign that started in Mar 2022. The Fed pivot is widely anticipated despite an economy that's still resilient and feeding inflation, contrary to persistent talk of recession.

Those who prefer to skip a hike in Jun want to wait and see - given the long and variable lags of monetary policy - how 500 basis points of rate hikes to date are cooling the economy. More hawkish members are convinced rates aren't yet restrictive enough, and the Fed shouldn't risk falling behind the curve. A 'hawkish skip' may be a way to maintain unanimity on the committee.

Oil bulls also have an old problem threatening to become new: an offer by Iran's supreme leader to reopen negotiations with the West for a nuclear deal that could put some sanctioned Iranian crude back on a market already worried about demand.

Ayatollah Ali Khamenei said that a deal was possible if Iran's nuclear infrastructure was kept intact. His comments came just a few days after both Tehran and Washington denied reports that an interim nuclear deal was close. They reignited fears of a nuclear deal, given that it could flood the market with supply as sanctions on Iranian crude exports are lifted.