Independent energy trader Jim Dietz told BloggingStocks Monday the above demand projections are, for the most, consistent with data he's reviewed. Dietz said the slow-growth U.S. economy and consumers' economizing has started to affect the oil and gasoline markets. "Throughout this oil bull run we've seen relentless demand, particularly for gasoline, but now we're beginning to see the U.S. consumer belt-tighten, and it's affecting inventories, which will lower prices," Dietz added. "My sense is that $3 gasoline will continue to pinch, and consumers will continue to curtail unnecessary driving. If unemployment rises, that will further hurt gasoline demand." Dietz added that he has short positions in oil open, with both daily and monthly trades.

Still, Dietz said OPEC should not cut production in March 2008, "unless the price of oil collapses below $60, which isn't likely."

$50 oil: now deemed cheap

"If they cut production before then, it will send the wrong signal to the markets that OPEC is trying to defend $80 or even $90 per barrel oil. That won't help consumer confidence any or brighten executives' views of business conditions," Dietz said. Dietz then commented on the irony of OPEC attempting to defend $80 or $90 per barrel oil: a year or so ago, the debate concerned whether at $50 per barrel oil's price was too high. Now, OPEC acts as if it's entitled to $80 per barrel oil and $50 would be viewed as a total price collapse, he said.

"We need an oil price that will stimulate the U.S. and global economies, and that's not going to happen with oil pushing $90 per barrel," Dietz said.

Dietz said the oil market has maintained its "offer" or sell tone, on the assumption that U.S. economic growth has slowed substantially in Q1 2008, which in turn will slow global economic growth and demand growth for both oil in emerging markets and gasoline in the U.S. He sees oil testing $75-$80 per barrel and gasoline testing $2.75-$2.80 per gallon by early spring.

A stronger bear

Further, although bearish on oil, Dietz is not among the strongest bears. "We're going up on false pretenses, rallying on the stimulus and rate cuts, not because of supply and demand," Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, told The Journal. Flynn expects oil to fall to possibly as low as $67 per barrel later this year in the spring as heating demand slows and prior to the peak gasoline demand of the summer.

Oil is down nearly 10% from a high of $100.09 per barrel reached Jan. 3, 2008. Oil hit an all-time high, in inflation-adjusted terms, of $102.80 per barrel in April 1980.