Ali Al-Naimi, Saudi Arabia's oil minister, in Vienna for OPEC's September meeting, added that he sees healthy inventories, Bloomberg News reported Tuesday.
The above comments were enough to convince energy traders and economists that OPEC will maintain current production levels when it meets later today, and oil fell $1.99 to $104.35 per barrel in early Tuesday trading.
OPEC a bigger concern than Hurricane Ike
Economist Peter Dawson told BloggingStocks Tuesday analysts and traders are certainly watching Hurricane Ike, a Category 1 hurricane that's likely to strengthen and hit Texas' oil-rig-laden coastline, but the larger concern remains OPEC.
"Of course, all eyes are on Hurricane Ike, which could cause loss of life and also significantly damage to property and oil facilities, but oil industry preparation has advanced and we're much better able to cope with these storms than even 10 years ago," Dawson said. "In comparison, an OPEC production cut is something no one can prepare for."
An OPEC production cut would halt oil's price slide at a time when the U.S and global economies need a lower price to rejuvenate GDP, Dawson said. The doubling of oil prices to more than $100 from $50 "basically reduced U.S. GDP by 1.0-1.3% in 2008, and slowed the global economy by about 0.5-0.8%," Dawson said.
Dawson added that he expects "no production cut from OPEC at this meeting." OPEC accounts for about 40% of the world's oil production.
The other major energy commodities also fell early Tuesday. Unleaded gasoline plunged 11 cents to $2.63 per gallon, heating oil declined about 8 cents to $2.92 per gallon, and natural gas sank 34 cents to $7.18 per million BTUs.
Oil Analysis: Assuming OPEC maintains its current production level, and Hurricane Ike causes minimal oil infrastructure damage, oil's downward track is set to continue, on projected slower global growth. The next, key, price support: the psychologically-important $100 level.
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