With oil treading-water well above the $90 mark, a production cut by the world's largest cartel, OPEC, at its March 5 meeting would be "disruptive and scandalous," according to one economist.

Economist Steve Affinito told BloggingStocks Monday the fact that oil surged more than $10 from a pullback to $86 after certain OPEC officials hinted at a spring production cut underscores the thin margin -- or safety cushion -- that exists between global oil supply and demand. Oil closed Monday up 42 cents to $99.23.

"OPEC says it's concerned about rising oil inventories this spring due to the sluggish U.S. economy but it conveniently forgets the small safety cushion. If markets were so well supplied as they say, oil prices wouldn't jump $5 or $10 every time an OPEC oil minister expresses the slightest concern about rising inventories," Affinito said. "The fact remains that although oil markets may be 'well supplied' there's very little margin for error or production break-downs in the international oil system."

The oil market, to put it diplomatically, has not provided a great deal of encouragement lately for policy makers attempting to stimulate U.S. economic growth.

Further, time was when an $80 or $85 price would be considered unreasonably high, or even outlandish. But given oil's breakthrough and close above key, psychological resistance of $100 per barrel this week, $80 looks almost like an acceptable price.

Moreover, oil mogul and billionaire T. Boone Pickens says we may get there. Providing a ray of light for concerned business executives, consumers and public officials, Pickens, who accurately predicted oil's rise to $100 per barrel, told CNBC Thursday oil should drop $10-15 in the second quarter of 2008.

"I think oil's going to back off," Pickens said during the interview. "The weakest quarter is the second quarter. We'll drop $10 or $15 a barrel in the second quarter. I think we'll be back above $100 in the second half of the year."

The economic landscape -- particularly for the United States -- certainly looks different than it did 30 or 40 years ago.

Globalization, the internet, and the rise of a second major economic power in Asia are all developments that would look rather odd to someone in, say, 1973-74. The world in 2008 is one characterized by economic change -- one that may usher-in even more historic political change in the months ahead.

But there has been one constant between the two eras (overlooking cyclicality): the price of oil. It was high, in real terms, in 1973-74, and it's high now. And one thing economists like Glen Langan know regarding economic conditions when oil's price is high -- it simply makes the cost of moving things, the cost of doing pretty much everything, more expensive. Whether it's dropping the kids off at little league baseball or at soccer practice, or transporting a supply chain order of refrigerators across the country, a high oil price "simply increases the cost of motion," he said. And there are few positives for the U.S. economy. Further, it takes dollars that could create spin-off economic effects -- disposable income that could be spent somewhere else -- and simply removes them from the economy.

Oil closed Wednesday up 73 cents to $100.74 per barrel -- a new record high close -- in a session anxious to hear Thursday's report on weekly U.S. inventories. Oil had traded at a print record $101.27 earlier in this session.

The weekly Wednesday oil inventory report will be released this week on Thursday, one day late, due to the Presidents' Day holiday. Oil closed above $100 for the first time in its history Tuesday, at $100.01.

"It's been a wait-and-see market today, for the most part," independent energy trader Jim Dietz told BloggingStocks Wednesday afternoon. "Neither bulls nor bears seem to want to make a major stand ahead of the inventory report, but we did trade above $100 again. If we close above it today, that would be a bullish sign." Dietz added that he is currently flat -- or has no open energy positions.

Crude oil traded at a record printed trade of $100.10 per barrel Tuesday before closing at $100.01 on talk that OPEC will cut production when it meets March 5.

Other major fuels also rose: heating oil soared 10 cents to $2.75 per gallon, unleaded gasoline vaulted 11 cents to $2.60 per gallon and natural gas gained 30 cents to $8.96 per million BTUs.

In inflation-adjusted terms, oil hit an all-time high of $102.80 per barrel in April 1980.

'So much for the bears'

Oil has rallied more than 15% since the yearly low of $86.99 on January 23, and it's giving oil bears like independent energy trader Jim Dietz fits.

Crude oil surged $2.53 to $98.03 per barrel in early trading Tuesday on a Texas refinery fire and concern OPEC will cut production at its March meeting.

A strong explosion Monday created a fire and shut off production at an oil refinery operated by Alon USA Energy (NYSE: ALJ) near Big Spring, Texas. The facility can refine 70,000 barrels of crude per day.

Heating oil jumped about 6 cents to $2.71 per gallon, unleaded gasoline surged about 7 cents to $2.56 per gallon, and natural gas rose 26 cents to $8.92 per million BTUs.

Independent energy trader Jim Dietz told BloggingStocks Tuesday that given the U.S.'s barely-adequate refining capacity, any incident in the refinery system can cause a price spike.

"There is so little spare capacity in the system, even a fire at a minor location can have traders flashing the buy card," Dietz said. "The U.S. has decided to allow new refinery construction, but the next new facility won't be ready for about 5 to 6 years. Expansions at existing refineries will provide some additional spare capacity later this year." Dietz added that he has no open daily positions, and is short oil with monthly contracts.

The Organization of Petroleum Exporting Countries cut its forecast for Q1 2008 global oil demand by 130,000 barrels per day to 87.19 million barrels per day on the threat of a U.S. recession, the cartel announced Friday, in its latest monthly report.

"A sharp economic slowdown, especially in the U.S., may further undermine demand growth in the coming months," OPEC said. It added that current OPEC output near 32 million barrels per day could help ease market fundamentals.

Crude oil was virtually unchanged on the news Friday afternoon, rising 1 cent to $95.47 per barrel. Heating oil fell about 3 cents to $2.63 per gallon, wholesale unleaded gasoline declined about 1 cent to $2.47, and natural gas dropped about 6 cents to $8.71 per million BTUs.

U.S. crude oil inventories increased 1.1 million barrels for the week ending February 8, 2008, the U.S. Energy Information Administration announced Wednesday. The statistic was below the 2.37 million barrel increase estimate.

The oil markets took Wednesday morning's inventory report in stride. Oil was down 41 cents to $92.37 per barrel, heating oil fell about one cent to $2.59 per gallon, unleaded gasoline fell one cent to $2.35 per gallon, and natural gas declined about three cents to $8.41 per million BTUs.

Meanwhile, gasoline inventories rose 1.7 million barrels and distillate stocks fell 100,000 barrels. At 301.1 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year.

Refineries operated at 85.1% of their operable capacity last week, up from 84.3% a week earlier.

Trader sees spring oil price decline

Independent energy trader Jim Dietz told BloggingStocks Wednesday the oil market is currently being driven by geopolitical events more than oil demand.

The Organization of Petroleum Exporting Countries may reduce production when it meets next month as part of a strategy to try to keep the price of oil above $80 per barrel, Bloomberg News reported Friday.

Oil fell $1.55 to $86.86 at mid-day after crude oil inventories rose by seven million barrels for the week ended February 1 -- well above the consensus estimate of a 2.6-million-barrel increase -- the U.S. Energy Information Administration announced Wednesday.

Meanwhile, gasoline inventories increased 3.6 million barrels and distillates rose 100,000 barrels.

Other oil and natural gas products also fell on the news. Heating oil fell about 3 cents to $2.41, unleaded gasoline declined about 3 cents to $2.23 and natural gas fell 50 cents to $7.99 per million BTUs.

Oil to test $80?

Independent energy trader Jim Dietz told BloggingStocks Wednesday the oil market "is becoming very price-heavy and the bears are piling up."

Iran's Oil Minister Gholam-Hossein Nozari said Tuesday that there's no reason for OPEC states to increases oil production, PressTV Iran reported.

"There is no reason for the Organization of Petroleum Exporting Countries (OPEC) to raise output as we are approaching the warm season," Nozari noted ahead of OPEC's meeting in Vienna on Friday, February 1.

The West, including the United States, has stepped up pressure on OPEC members to increase oil production to combat persistently high energy prices that many economists believe have slowed the U.S. and global economies. OPEC supplies about 40% of the world's oil.

OPEC is said to be evaluating a potential production cut this spring, but is likely to keep its output quota the same when in meets Friday in Vienna, The Wall Street Journal (subscription required) reported.

OPEC, which produces about 40% of the world's oil, is said to be concerned that the U.S. economic slowdown could hurt oil demand growth. Oil traded 77 cents lower to $89.94 per barrel in Monday afternoon trading. Heating oil fell about 2 cents to $2.50 per gallon, unleaded gasoline declined 1 cent to $2.30 per gallon. Natural gas fell about 1 cent to $7.99 per million BTUs.

OPEC expects global oil demand of 87.4 million barrels per day in Q1 2008 and 85.5 million in Q2 2008. Meanwhile, the International Energy Agency expects slightly higher demand during the two periods, 88.2 million in Q1 2008 and 86.7 million in Q2 2008.

Tuesday was a good day to be flat -- or to have no open trades -- in the oil markets.

Independent energy trader Jim Dietz said he was flat Tuesday, and very happy to be so.

"The market ripped down $3 [per barrel] on Asian and European market sell-offs, then ripped up after the Fed's rate cut announcement. It was a great day to be flat," Dietz said. "In other words it was a day that could ruin both oil bulls and bears."

For the day, oil closed down 85 cents to $89.72 per barrel. Heating oil closed down 4 cents to $2.46, unleaded gasoline closed down about 3 cents to $2.27 and natural gas closed down 34 cents to $7.653 per million BTUs.

Short-term, the markets will be focused on Wednesday's U.S. Energy Information Agency petroleum status report. he said. Long-term, Dietz said, the market will "spend some time sorting out the implications of the [equity markets] sell-off for regional and global economic growth."

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.

With the above in mind, Dietz said he still sees oil testing $75-$80 per barrel by early spring, with the U.S. national average for unleaded regular gasoline dropping about 20 cents to $2.75-$2.80 per gallon, as well.

Oil plummeted $2.38 to $89.52 in early trading Wednesday after the U.S. Energy Information Agency announced that weekly crude oil inventories rose 4.3 million barrels to 287.1 million barrels, well above the 1.25 million barrel increase consensus estimate.

Heating oil fell 4 cents to $2.49, unleaded gasoline fell about 5 cents to $2.26, and natural gas fell about 4 cents to $8.15 per million BTUs.

However, despite the prospect of a U.S. recession that could lower oil demand, the International Energy Agency maintained its 2008 global oil demand forecast at 87.8 million barrels per day, a 2.3% increase from 2007, the organization announced Wednesday in a statement.

Still, the IEA qualified its 2008 oil demand projection by saying the estimate would be adjusted downward if evidence indicated the U.S. economy continues to slow.

The average price for gasoline in the U.S. has risen about 10 cents in the past three weeks, according to the Lundberg Survey, The Associated Press reported Monday. The average price on Friday for unleaded regular was $3.07, mid-grade was $3.19 and premium, $3.30, the survey indicated.

Price driver: oil

Independent energy trader Jim Dietz said oil's persistently high price has created an unusual market condition: a lack of a pronounced dip in gasoline prices during the winter months.

"Typically, gasoline demand drops during the winter months, when travel and leisure driving decreases, and that usually causes the price to drop substantially. But it hasn't this winter so far. The high oil price has kept gasoline prices from falling much, with prices about 30% higher than they were a year ago," Dietz said.