Oil prices continued to deteriorate for the second week in a row. Brent crude dropped below the $60 barrier for the first time in a month.
Brent fell to $58.37 per barrel which is close to the level it was before the attacks on Saudi Aramco oil facilities on Sep. 14.
WTI also fell to $52.81 per barrel.
Worrying economic news continued to put downward pressure on the market. However, the focus should not be on the slowing economic outlook that is detached from oil market fundamentals.
The market continues to shrug off the possibility of serious supply threats. Conventional oil discoveries have plunged to a seven-decade low with no signs of any speed recovery amid lower capital expenditure investments.
This coincides with OPEC oil output falling to an eight-year low in September.
At the same time, output from the US and Russia, also fell to 11.81 million bpd and to 11.24 million bpd respectively.
Right after the Saudi Aramco attacks, many speculators took advantage of the short-lived price spike as a major opportunity to sell older positions and lock in profits.
However, after oil prices plunged for the second week in a row, money managers reduced their net long positions in Brent futures.
That was largely because speculators have been discouraged by the weakening macroeconomic outlook which of course implies weakened demand for oil.
However, demand remains strong for Arabian Gulf sour crude grades despite a return to normal Saudi pre-attack production levels.
The physical spot market remains extremely tight, reflected in steep Dubai backwardation and higher official sales prices (OSP) for November Arabian Gulf sour crude grades.
The Russian crude grade, ESPO, also fetched high premiums despite the restoration of supply in the Kingdom.
Brent-linked crudes are still not economically cheap enough to flow into Asia to compete with the Arabian Gulf sour crudes.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq