What better evidence does the United States need to increase fleet-wide auto efficiency and pursue conservation measures than another production cut by OPEC?

Iran Monday said OPEC may meet before its scheduled meeting on December 17 to discuss production if oil prices keep falling, Bloomberg News reported.

Oil rose 94 cents to $61.98 per barrel on Monday at mid-day after China announced that it will spend an additional $586 billion in fiscal stimulus to maintain economic growth, amid a global economic slowdown, the Agence France Presse reported Monday. (Most economists/analysts view signs of continued, adequate GDP growth n China as bullish for oil prices, given the size of China's economy.)

OPEC concerned about falling prices

Gholamhossein Nozari, Iran's oil minister, said an OPEC meeting this month "is possible," if oil's downward trend continues, Bloomberg News reported. Oil prices have fallen more than 55% in 2008 since hitting a record high of $147.27 per barrel in July.

Earlier this month, OPEC, which accounts for about 40% of the world's oil production, announced a production cut of 1.5 million barrels per day, effective December 1.

Oil prices, the source of so much inflation and consternation in the developed and developing world, are expected to continue to slide toward $60, economists and traders say, even as OPEC prepares to cut production at a special meeting this week.

Oil has fallen about 50% since hitting a record high of $147.27 per barrel in July, amid a financial crisis that's slowed growth in every region of the globe. Further, OPEC, which produces about 40% of the world and will hold a special meeting October 24, will only able to slow oil's descent to the $60-range, with anticipated production cuts, so says economist Peter Dawson.

"The report that China's economy grew at a 9% annual rate in the third quarter is the last piece of the oil demand puzzle, as far as the slowdown is concerned," Dawson said. "China was growing at better than 10% in the same quarter a year ago, so that will further reduce the growth in global oil demand, which is bearish for oil prices. Prices will most likely slide toward the $60-range by mid-2009." Oil rose $1.35 to $73.20 per barrel in Monday morning trading.

Iran has not been a friend of the U.S. for a long time. It went a long way to prove that by calling on OPEC to tighten the supply of oil to a level at which prices are high enough so the crude producers can make some extra cash.

According to Reuters, "Iran's oil minister renewed his call for OPEC to cut production when it meets later this week, saying this was the only way to prevent crude prices falling further." Other media sources said Iran actually wants to drive the price of crude back up.

The rest of the OPEC members may want to give the proposal some thought. Higher prices may bring them more profits in the short term, but if the west and China are pulled into a deep recession then demand for oil could fall very quickly. Pushing up what is being charged for such a critical commodity would make the downturn even worse.

OPEC may not care about its image, but it should be concerned with its own long-term income.

Douglas A. McIntyre is an editor at 247wallst.com.

OPEC again cut its forecast for 2009 global oil demand, the cartel announced Wednesday in its monthly report, raising the specter that hawkish cartel members will push for production cuts at a special meeting next month.

OPEC now believes (pdf) that 2009 global oil demand will increase by 800,000 barrels per day to 87.21 million barrels, compared to the previous forecast of a 900,000 barrel per day rise.

OPEC said its production in September averaged 32.16 million barrels per day, down about 310,000 from August.

Energy prices continue to fall

Energy prices retreated Wednesday on the news. Oil fell $3.44 to $75.21 per barrel. The other major energy commodities also fell in early trading Wednesday, continuing their nearly month-long downtrend. Heating oil fell about 5 cents to $2.20 per gallon, unleaded gasoline declined about 8 cents to $1.80 per gallon, and natural gas fell 7 cents to $6.66 per million BTUs.

In its report, OPEC said that even if governments are successful in unfreezing credit markets, the fallout in the real economy is expected to be considerable. The credit drag, combined with decelerating growth in both developed and developing world economies, will weigh on oil demand throughout 2009. OPEC has called a special meeting for November 18 to address what it argues is an oversupplied global oil market.

As national policy makers strive to unfreeze credit markets and end a global financial crisis that threatens to severely damage economies worldwide, Saudi Arabia will not defend an $80 oil price, and instead will let the price of oil fall, to reduce a critical cost stress on the global economy, economists and energy traders say.

Further, despite today's more-diverse oil market characterized by dozens of suppliers, any Saudi decision to not cut production will lower oil prices, Energy Trader Jim Dietz told BloggingStocks Friday.

Saudi Arabia possesses the largest, proven oil reserves in the world. The kingdom also has the biggest, quickly-marketable spare production capacity in the world, estimated to be 1.5-5.0 million barrels of oil per day, depending on the analysis.

'Saudis will let oil price fall, a lot'

"The Saudis are fully aware of the grave situation facing global financial markets and economies. The Saudis are going to let the price of oil fall, a lot. Other OPEC members like Iran or Venezuela may call for a production cut and try to protect their interest, but it's a non-starter, an after thought," Dietz said. "The Saudis know that every stimulative tactic must be used to keep commerce moving and eliminate stress and a lower oil price is part of that solution." (Dietz added that he had no open energy trading positions, his normal stance for a Friday.)

Oil fell $6.94 to $79.65 per barrel Friday at mid-day, as a near-panic atmosphere permeated markets as stocks plunged worldwide and U.S. stock markets declined for an eighth consecutive day. At 12:05 p.m. EDT, the Dow was down 313 points to 8,265 and the S&P 500 was down 38 points to 871.

"An $80 oil price is too high for this economy. It probably was too high for any economy, but that is a debate for another time. Right now, the oil market senses that the Saudis know the price of oil must go lower to reduce financial system stress," Dietz said. "And as the Saudis go, so goes the price of oil."

One wouldn't call it the best week in the world for OPEC.

Once again, the world's best-known cartel has demonstrated that the coalition is not as cohesive or harmonious as a symphony orchestra.

Saudi Arabia, in confidential communications, let it be known that the kingdom would ignore the stated intent of other cartel members and continue to pump plenty of oil, The New York Times reported.

On Wednesday, OPEC announced that members would redouble effort to adhere to production quotas -- not exceed them as some members typically do -- an effort that, if effective, would be tantamount to a roughly 500,000-barrel per day cut in production, The Times reported.

OPEC's hawkish members said lower production is needed to eliminate what it believes is an oversupply in the market, and they cited this as the reason oil's price has fallen about 30% in two months to the $100-range, Bloomberg News reported. Oil closed Friday up 31 cents to $101.18 per barrel.

With oil prices falling, some members of OPEC would like to see price cuts to put upward pressure on crude. That would make sense. It would bring members of the cartel more money and stretch out the pace at which they need to ship their current reserves.

Venezuela, where the head of state Hugo Chavez seems to have no love for the U.S., has lobbied fellow OPEC members hard to dial back oil shipments. The Arab states may not be so eager. According to Bloomberg, "Saudi Arabia, the world's biggest producer and de facto leader of the 13-member Organization of Petroleum Exporting Countries, the United Arab Emirates, Qatar, and Kuwait may reject calls from Venezuela and Iran to trim supplies at its Sept. 9 meeting in Vienna."

Increased cash flowing into the Middle East is feeding sharp increases in inflation, but that may only be a small part of the reason behind the motivation to do nothing with fuel supplies.

Saudi Arabia and its neighbors know that extremism continues to grow in the region. They are also not geographically far removed from the trouble in Georgia. The nation, which is at "war" with Russia, is close to the norther border of Iran. In other words, there is more than one threat to stability in the region.

The United States keeps a tremendous military force in and around Saudi Arabia. The kingdom may not want to go any further than it has to alienate America.

Douglas A. McIntyre is an editor at 247wallst.com.

There are times when you need an archive of information and evidence to make an argument.

Then there are times when one simple fact or incident makes the case by itself. (Which, incidentally, may very well be the genesis of the adage "A picture says a thousand words.")

Evidence item of consequence: a lunch that global trade consultant Edward Goldberg, a colleague of New York Times columnist Thomas Friedman, had with a Russian trade attaché.

The Russian trade attaché, Friedman relates, years ago was delighted to hear from Goldberg that the Bush administration wanted to drill for oil in the Alaskan wilderness. The reason? The amount of oil derived would be negligible in terms of the U.S.'s needs, and it signaled that the Bush Administration was not planning to do anything to establish an alternative energy program, "which of course would threaten the economic growth of Russia."

A psychology reversal may be occurring in the oil market - a shift in sentiment that may be good news for U.S. consumers. That was how one trader characterized oil's $3.41 fall to $118.00 per barrel Tuesday in premarket trading.

Tuesday's early morning negative catalyst was a report that Tropical Storm Edouard will leave U.S oil rigs and refineries without significant damage, but energy trader Jim Dietz said bearish sentiment has been on the rise for about 10 days.

Beginning of psychology reversal?

"Tropical storm or not, a psychology reversal is starting to occur in the oil market. There's a real concern now that a global economic slowdown is occurring and it will be reflected in oil demand figures for August and September," Dietz said. "We've had two days of a storm in the Gulf of Mexico and negative rhetoric from Iran and oil rallies couldn't hold. That's a sign of a bearish market."

Dietz said he is presently flat, or has no open energy trading positions, but added "that may change later today if the bearish trend persists."

At this juncture, investors/readers thinking about speculating a little in oil via shares in the United States Oil Fund (AMEX: USO) or via an integrated oil company should think again.

With the U.S. stock market meandering and the nation's economic doldrums continuing, the urge can build in investors, particularly those less-experienced, to try something daring.

However, the oil market is currently in a tug-of-war between the geopolitical concern-oriented bulls and the global economy slowdown-oriented bears.

In other words, the oil market is about as balanced -- or as divided -- as it has been in about two years, so says energy trader Jim Dietz. Oil closed Friday up $1.02 to $125.10 per barrel. Oil is down about 15% from its all-time high of $147.27 registered on July 11, 2008, but is still up about 100% over the past year and about 400% since 2000.

Since the middle of July we have been able to breathe a little sigh of relief as oil prices have been heading lower from the recent record highs. However, this morning oil prices are getting a slight boost as traders try to digest additional supply concerns.

Lately, it has been hard to discuss the state of oil prices without mentioning Iran and its controversial President, Mahmoud Ahmadinejad, and that holds true again this morning. Over the weekend, the leader of the Islamic Republic caused even more tension over his country's nuclear program.

Iran has been claiming for the past couple of years that it has only peaceful intentions regarding its nuclear program, but of course the rest of the world, in particular Israel and the United States have voiced openly their distrust, and have claimed Iran has a more sinister intention ... nuclear weapons.

Oil got off to a strong start today, with prices at one point moving up as high as $130.69 a barrel as fears of supply disruptions in Iran have kept the market bullish for the time being.

Prices cool off a bit and are now sitting at $129.40, but you can be sure that as long as the tension between the West and Iran persists, you are going to continue to see prices that just refuse to come back down towards any sort of comfortable level.

Last week, we saw a pretty sizable drop in oil prices (see chart at the end of this post), which could be the main reason why this morning's rally was not able to hold above the $130 mark. Investors are probably still a bit weary of betting that we have hit support yet. What really got the market moving early on was fresh threats from the U.S. that more sanctions would be imposed on oil-rich Iran should it not cease its current nuclear program.

At first glance - - investigating whether OPEC will be able to stunt oil's rise to $150 per barrel may seem moot.

Not so, says energy trader Jim Dietz, and he cited three reasons.

First, the oil shorts - - those who believe oil is overpriced / too high - - are likely to mount a rigorous defense of $150. (Oil traded up $4.75 to $146.40 per barrel Friday at mid-day after hitting a record high of $147.27 earlier in the day.) "It will not be an easy barrier to mount. It will be easier to break than the $100 barrier but keep in mind it took several months and at least 5 sequences to break $100, once we got within the range," Dietz said. "Look for almost as tough price resistance at $150."

Second, many oil longs - - those who calculated that oil is trending higher - - will take profits at $150, Dietz said. "The $150 mark will result in many players and institutions cashing in their long trades, on rationality grounds," Dietz said. "For example, if you established trades at $80 or $85, common sense says $150 represents a good time to exit. Likewise for more-daring institutions that went long above $100. The thinking will be 'We're at $150 after a high entry point. How long do we expect this insanity to go on? Let's take some profits and reduce our exposure.' That will add to selling pressure." Dietz added that he is presently flat, or has no open energy trading positions - - his normal stance for a Friday in the summer.

Finally, those facts, combined with already-announced oil production increases by Saudi Arabia, will enhance OPEC's ability to slow gains in the price of oil near/at $150 per barrel, Dietz said. Further, Dietz believes Saudi Arabia will announce still another production increase, perhaps as large as 300,000 barrels, to calm markets, "and eliminate doubts in some energy corners about its spare capacity and ability to ramp-up production."

Oil rose more than $4 a barrel early Friday morning to a record $145.98 on concerns that Israel may be preparing to attack Iran and on supply concerns in Nigeria and Brazil.
[Update: Oil prices continued to climb, reaching a record of $147.03 a barrel, and this may not be the last update.]

Oil came within a whisker of $146 per barrel after Israeli fighter jets reportedly practiced over Iraq according to Iraqi and Iranian sources. This, however, was enough to increase speculation among traders that Israel is preparing to launch a military strike against Iran's nuclear facilities.

The United States and the European Union want Iran to end uranium enrichment, a technology that would give Iran the materials needed to produce a nuclear bomb. Iran says it wants the nuclear technology solely to produce electricity for civilian use. If one discounts oil sands, Iran has the world's second largest proved oil reserves, after Saudi Arabia.

Oil was also fanned higher by threats of additional Nigerian civil unrest and Brazilian oil union's plan to start a 5-day strike, Bloomberg News reported Friday.

The other major energy commodities, likewise, also jumped in early Friday morning trading. Heating oil surged 8 cents to $4.12 per gallon, unleaded gasoline rose 6 cents to $357 per gallon, and natural gas jumped 16 cents to $12.53 per million BTUs.

You know it must be serious if the French fall into line. French oil giant Total (NYSE:TOT) became the last large Western oil firm to decide to forgo a deal with Iran.

According to a Marketwatch article: " Christophe de Margerie told the Financial Times that it won't invest in a project to develop natural-gas fields in Iran, leaving Iran without the technical know-how to significantly raise its gas exports until late next decade."

This obviously comes as good news as the US urges world leaders in both Europe and China to enforce tough sanctions against the Iranians. The feeling is that if they don't, an Israeli strike on the Iranian nuclear program is inevitable, and that could cause a full-fledged war in the Middle East.

While the other global oil titans were quick in announcing that they will refrain from doing business with Iran, Total basically only did it out of political pressure. The CEO basically reasoned that if they went ahead with the deal, people would say that Total has no principle whatsoever and that they would do anything to make a buck.

I guess as long as the ends justify the means we should applaud the Total position.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/10/08.