Falling oil prices are not the bellwether for the global economy they once were, and a rebound will only come when producers seriously cut back on the amount they are pumping.
"The weakness in oil prices is not telling us the economy is collapsing. It's just that there's way too much oil," said Ethan Harris, head of North America economics at Bank of America Merrill Lynch. "Only a small part of that is that demand is weakened. It's not telling us about global spending. There's just too much supply."
The world is currently oversupplied by an estimated 1.5 to 2 million barrels a day, thanks to hefty production by the three largest producers — Saudi Arabia, Russia, and the U.S. — and incremental new barrels by producers such as Iraq.
U.S. crude futures fell to $32.10 a barrel on Thursday, their lowest level since 2003. The Energy Information Administration said U.S. oil production has been running at about 9.2 million barrels a day, under its all-time high of 9.6 million, but a steady and high level given the impact on producers of sharply lower price.