Even so, it's worrying. It means that oil companies have (collectively) predicted a much higher future demand growth than realized. This suggests that the world's economies aren't growing as quickly as they used to (many fingers are pointed at China), and could spell troubles for other industries who have also invested heavily, anticipating future growth that won't come (so soon).
That might be an over-extension of the markets-as-preditive-tool view. I am more inclined to see the current prices as a consequence of latencies in the oil markets that prevent it from showing true supply and demand accurately. When prices were high, too many new wells were drilled at once because it takes a long time for the new oil to hit the market and bring prices down. When the new oil hits the market and starts reducing the price, none of the producers can cut back on what they send to market because they have to pay off the loans that they used to drill their wells in the first place.
The supply side is structurally unable to respond to demand, regardless of what they predict future demand to be.
Oh look, there's a version you can play online: http://forio.com/simulation/harvard-business-school-root-bee...
It's a very ballsy move, but it's also a very dangerous one, because the Saudi regime relies heavily on direct patronage - handouts - and if those stop happening there's a real danger of instability.
It's also very dangerous to poke Russia too hard, because Putin really isn't likely to say "Fine then, I'll just give up."
This could all end very badly for everyone.
So they've decided to fight for market-share this time. And they can, since their production prices are on the low side.
It gets more bizarre though. Putting aside economics, the US, the Saudis and the Iranians all have a pretty aligned geo-political reason for pumping the oil hard: ISIS.
Politics and war make strange bedfellows.
Syria's production is close to Belarus's production and behind Cuba's. And even before its decline it was behind Ukraine's production.
It's not a big enough player for anything. Especially for a juggernaut like Russia.
But so if there's only so many barrels of oil going to be sold, then at this point it really is an all-out scrap for market share. Maybe Saudi Arabia is aiming to just to divest themselves of the majority of their reserves while volumes like that can still be moved at all, i.e., over the next 20-50 years.
If this is a 20 year game then it's time for bold moves.