Since touching a high for the year above $73 a barrel last month, oil prices have fallen steadily for the last two weeks, closing at $59.89 on Friday. The so-called green shoots of economic revival, which had been driving the oil market higher since the first of the year on hopes that demand would pick up, have been withering. Demand remains weak, inventories are continuing to grow, and OPEC exports are creeping up.

With the exception of China, which claims to be making progress despite a 21 percent slump in exports, the economic news from around the world has been almost all bad. Unemployment is rising, production and retail sales are falling, and asset values, particularly for real estate, continue to drop. Given this situation, it is difficult to make a case that demand for oil will increase in the near future.

Optimism continues, however, that by next year the various stimulus packages and bailouts will do more than just reduce the pace of economic contraction. Last week, the IMF forecast that the world economy will expand by 2.5 percent next year and the IEA issued a companion estimate that the demand for oil will increase by 1.4 million b/d, or 1.7 percent, in 2010.

As unemployment increases, concern is growing in Washington that last winter’s $800 billion stimulus package will not be sufficient. Talk of a second stimulus package is beginning to amp up and the issue is already becoming politically controversial.

While the prognosis for the world’s economy overshadows other oil industry news, the Niger Delta militants continue to blow up pipelines, Venezuela is on course to lose more production as the unpaid oil service companies reduce drilling, the Iranian post-election situation is far from over, and the future of Iraq is becoming increasingly cloudy as US forces pull back, violence increases, and the Kurds reassert their independence.