As global oil prices beat a hasty retreat from the relative highs of recent years – dropping roughly $20 per barrel in weeks – market watchers have attempted to diagnose the situation. A popular view now is that Saudi Arabia is willing to take a short-term budgetary hit from lower prices in order to force some higher cost producers to lay down rigs, which would rebalance market fundamentals and put upward pressure on prices. The main risk with that strategy is that prices overcorrect to the high side stifling demand and beating down the fragile global economy. [Financial Times]

The International Energy Agency on Tuesday cut its oil demand forecasts for this year and next, adding fuel to the bullish oil market fire. There has been lots of dismal economic news from the IMF, European countries and China lately, but the IEA’s move to cut 200,000 b/d from this year’s oil production growth forecast and 300,000 b/d from next year’s is one of the first direct links between recent economic indicators and lower demand for oil. [Reuters via Rigzone]

Outspoken Saudi Prince al-Waleed bin Talal sent an open letter to Oil Minister Ali al-Naimi in which he questioned the minister’s seemingly sanguine reaction to plummeting oil prices. The prince focused on the average annual oil price needed to balance the Saudi budget, which is estimated around $93/bbl this year, and apparently thinks the Opec powerhouse should cut output to support that price. However, it’s unclear the Saudis wield the same level of swing-producer clout traditionally enjoyed and appear to be taking a different tack through current market conditions. [Wall Street Journal]