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Oil's slide toward $62 to test OPEC resolve
LONDON (Reuters) - Oil slid below $63 a barrel on Friday touching its lowest level since March as U.S. fuel stockpiles grew ahead of winter and investors probed for a price that would trigger an OPEC supply cut. Waning concern about the West's atomic row with Iran added to bearish sentiment.

U.S. crude was down 70 cents at $62.52 a barrel at 1615 GMT, after touching its lowest since March 23 at $62.03. London Brent crude was off 79 cents to $62.75.

"Our sense is the market might like to test where OPEC wants to set the price floor," said Frederic Lasserre, head of commodity research at Societe Generale. "The psychology of the market has really turned, it looks like the market will be oversupplied next year unless OPEC does something."
Is it just me or is that complete nonsense? 'Psychology of the market'? I thought it was that there are folks with oill to sell and folks with money to buy, and they're settling on what each thinks is a fair price. But I only took a year of economics in college so I might be missing something.
The Organization of the Petroleum Exporting Countries (OPEC) on Friday cut its demand forecast for its oil by 200,000 barrels per day (bpd) next year, when supply from rival producers is expected to surge. The group's own economists expect demand for OPEC oil in 2007 to be 800,000 bpd below this year.

OPEC ministers kept oil output steady near a 25-year high at a meeting this week, but left the door open to a supply cut before the end of the year. They have been at pains to avoid setting a price target they would defend. "(OPEC ministers) have not had to think about cutting output to defend prices for a long time, but the question is now front and center in the market," said Mike Wittner of Calyon.

Top world exporter Saudi Arabia would start quietly trimming supplies if U.S. crude fell to around $60, Wittner said.

Oil has fallen more than 20 percent from its mid-July record of $78.40 as the supply picture improves.

Mounting evidence that the United States has enough fuel stocks to meet winter heating demand further pressured prices. Natural gas stocks are over 12 percent above the average for the last five years. And distillate stocks, which include heating oil, are at their highest level since October 1999.
OPEC can cut if they want, it will just keep the market pressure such that oil shale and everything else out there goes forward. And we've proven we can handle $3 a gallon gasoline.

Posted by: Steve White 2006-09-17
http://www.rantburg.com/poparticle.php?ID=166078