The current oversupply, the lack of any prospect of a rapid "improvement" despite (or indeed because of) this week's OPEC meeting, the strong US dollar and weaker economic data from China are weighing on the mood of oil market participants.

The ongoing robust level of crude oil production is likely to have played its part in this, having fallen only slightly week-on-week and still remaining only just below a three-month high.

On NYME, WTI crude for January delivery traded in a broad range between $41.52 and $42.60 a barrel on yesterday.

WTI crude oil futures (CL!1) extended losses from last week's close at 40.74 to 40.06, but that was the time when bulls became alert to push the prices higher to current levels.

Global oil production is outpacing demand following a boom in U.S. shale oil output and after a decision by the Organization of Petroleum Exporting Countries (OPEC) last year not to cut their supply quota.

As expected, the geopolitical tensions between Turkey and Russia were not able to lend any lasting support to oil prices, which have now continued on their downward trajectory.

More evidently, the weakness in the Chinese economy is now so marked that Sinopec sees itself forced to raise the prospect of high premiums on diesel exports for its refineries. Diesel is heavily dependent on industry, which continues to perform disappointingly.

It therefore comes as no surprise that China exported around 5.3 million tons of diesel in the first ten months of the year, which is 50% more than in the same period last year. Due to be published tomorrow, the Purchasing Managers' Index for the manufacturing sector (PMI) is likely to remain below 50, confirming the weak industrial demand.

At the same time, there is very little hope that any agreement will be reached with respect to production cuts at OPEC's meeting on Friday.

However, the oil markets are unlikely to be further unsettled if OPEC sticks with its strategy of defending market shares against non-OPEC producers and oil prices remain low for some considerable time.

In our opinion, the most important thing if oil prices are to recover long term is for non-OPEC oil production to decline lastingly. Consequently, the low oil prices are actually desirable for OPEC at present.