Oil's Charge to $100 a Barrel Slows Ahead of OPEC Summit

RIYADH, Saudi Arabia, Nov. 13 -- Oil prices slid Tuesday after Saudi Oil Minister Ali Nuaimi tried to slow rising oil markets by telling reporters here that "the fundamentals do not support the current price."

On the eve of the third summit meeting of the heads of state of the Organization of the Petroleum Exporting Countries in the group's 47-year history, Nuaimi said that the leaders would not negotiate production levels and gave no indication of whether Saudi Arabia would unilaterally boost its output to restrain skyrocketing crude oil prices.

A Saudi government strategist said later that the kingdom would probably announce a modest boost in production when OPEC ministers meet again Dec. 5 in Abu Dhabi, United Arab Emirates, without heads of state. "These prices are exactly what we don't want," said the strategist, who spoke on condition of anonymity because the Energy Ministry takes the lead in commenting on oil.

Many analysts have been saying crude oil prices could soon break the $100-a-barrel mark. On Tuesday, however, crude dropped $3.45 a barrel on the New York Mercantile Exchange, to close at $91.17.

Another factor nudging oil prices down Tuesday was the International Energy Agency's revised forecast of fourth-quarter oil demand. Citing high fuel costs and the likelihood of an economic slowdown in the United States, the IEA lowered its estimate by half a million barrels a day, which could ease pressure on prices.

"From a practical standpoint, hitting a round number may not confer any specific damage, but the cumulative $70 rise in price since 2002 is, we believe, having a cumulative effect," the IEA said.

The agency now forecasts growth in world oil demand of 1.2 percent this year and 2.3 percent next year.

The IEA also said that the share of household expenditures devoted to motor fuel has reached its highest level since the early 1980s. That share, which had dipped below 3 percent in the late 1980s, reached 4.5 percent in 2005, the IEA said, citing the latest U.S. government statistics.

Still further downward pressure on oil prices came Tuesday with the expiration of a batch of options to buy crude oil at $100 a barrel. When holders did not exercise the options before the close of trading, they became worthless.

Asked whether OPEC felt that higher production wasn't necessary because of the possibility of an economic slowdown in the United States, Nuaimi said: "Any country goes through a recession, particularly the biggest consumer in the world. We do not hope that happens. We are not planning on that happening, and [God willing] it doesn't happen."

The Saudi oil minister said that "the price today has no reflection whatsoever with the fundamentals" -- meaning that oil supplies were not tight enough to explain the sharp increase in prices over the past three months. He said that crude oil inventories were in the middle of the five-year average, adequate to meet demand.

"I believe that OPEC is interested in less volatility and less swings in the market," he said.

He also criticized the "pessimism" of people who said that oil exporting countries in coming years would not be able to meet rising world consumption, especially from developing countries. He reiterated that Saudi Arabia would have the capacity to produce 12.5 million barrels a day by 2009. Nuaimi said Saudi Arabia is currently producing about 9 million barrels a day.

However, a year ago, when oil was slightly over $50 a barrel and falling, Saudi Arabia cut production by about half a million barrels a day to stop the price decline. Other OPEC countries also trimmed output. OPEC nudged its production up again slightly -- about 2 percent or 500,000 barrels a day -- in September this year.

In the United States, some groups are trying to take advantage of the OPEC summit, to be held here on Saturday and Sunday, and current high prices to push Congress to move toward passage of an energy bill. Intense negotiations over the past 10 days have failed to resolve key issues.

The Pew Campaign for Fuel Efficiency said it was taking out ads in congressional publications this week that feature a group photograph from the last OPEC summit meeting, in Caracas in 2000. The headline on the ad reads "Why are these men smiling?" and urges Congress to adopt a Senate measure that would raise fuel efficiency standards for automobiles to 35 miles a gallon by 2020.

"OPEC may not like it. But our country will be safer. And we'll all save money at the pump," the ad reads.

The recent spike in oil prices has been among the forces rattling global stock markets and raising the prospect of a slowdown in U.S. consumer spending. Federal Reserve Chairman Ben S. Bernanke last week cited the price of oil as one of the main threats to U.S. economic performance, raising the prospect of short-term inflation and the even more unsettling prospect of a long-term shift in economic expectations.