But when will prices drop?

Crude-Oil Prices Slip Below $64 a Barrel

By MADLEN READ, AP Business Writer1 hour, 34 minutes ago

Crude-oil prices slipped below $64 a barrel Friday after OPEC lowered its demand forecast, supporting the belief that the high retail price of gas is keeping consumers from depleting supplies.

Light, sweet crude oil for October delivery fell $1.25 to $63.50 a barrel in midday trading on the New York Mercantile Exchange.

Heating oil slumped more than 5 cents to $1.8550 a gallon, and gasoline dropped nearly 8 cents to $1.82 a gallon.

October Brent crude futures on London's International Petroleum Exchange fell $1.38 to $62.28 a barrel.

"Everyone is lowering their expectations for demand," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. "It's taken the urgency out of the market."

Crude-oil prices are less than a dollar off week-ago levels, while heating oil is about 2 percent lower and gasoline is down about 7 percent. Gas prices at the pump are slowly following suit — the average price of a gallon of unleaded gas was $2.89 on Friday, down from $2.92 the day before and the all-time high of $3.06 reached Sept. 5.

In its latest projection, the Organization of Petroleum Exporting Countries said world oil-demand growth would fall by between 150,000 to 200,000 barrels a day for the remainder of 2005 and into 2006 as high prices force consumers to reduce purchases of petroleum products.

The 11-member cartel, which pumps a third of the world's daily diet of 84 million barrels of crude, meets Monday to decide on future output.

Oil companies have bought 11 million barrels of crude from the U.S. government's reserve, the Energy Department said Wednesday. That's only about a third of what was offered after Katrina hit, which suggests that the industry is confident that crude supplies are adequate.

Over 56 percent of daily oil production in the Gulf remains blocked — about 35 percent of which is shut in due to problems with onshore infrastructure, the Minerals Management Service said Thursday.

Although crude-oil prices are well below the record of $70.85 briefly hit on Aug. 30, they remain about 50 percent higher than a year ago.

When the American public's buying patterns will return to normal as the Gulf region recovers from Katrina, Silliere said, bullish sentiments could return to the market.

"Demand loss had a lot to do with sticker shock," he said.

President Hugo Chavez of Venezuela — an OPEC member and the world's fifth-largest oil exporter — said Thursday at a U.N. summit in New York that prices could rise to $100 per barrel because members of the cartel are pumping at near capacity and oil reserves are running out.

But Julian Lee, energy analyst at the London-based Center for Global Energy Studies, said Chavez's forecast wasn't receiving much credit in the market.

"The $100 barrel price is very much wishful thinking on Venezuela's part," Lee said. He added, "Venezuela does not produce enough to meet its own quotas, so the only upside for the country is high prices."

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