HOUSTON -- Oil prices could continue to fall whether or not OPEC intervenes with more production cuts unless a cold snap interrupts the Northeast's balmy winter and jump-starts weak demand, an oil economist said Tuesday.
Continued warm weather in what is supposed to be the coldest month of the year is leaving robust stockpiles of heating oil.
That, coupled with weak demand in the United States and other developed countries, will exert more downward pressure on crude prices no matter what the Organization of Petroleum Exporting Countries does to reduce supplies, said Philip Verleger, an independent economist who heads PK Verleger in Aspen, Colo.
"There's nothing OPEC can do about this problem short of figuring out how to force Mother Nature to make it cold," he said.
Oil prices fell below $55 a barrel for the first time in a year and a half during intraday trading Tuesday, but closed at $55.64 on the New York Mercantile Exchange.
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For consumers, who relate to oil prices mainly by what they pay for gasoline, the drop is good news.
"Without doubt, there is downward pressure on all the markets, especially in the East where we're just overflowing with heating oil," said Dan Gilligan, president of the Petroleum Marketers Association of America in Arlington, Va.
He said the 3-cent drop in gasoline prices last week is "definitely attributable" to that pressure, which he expects to continue for the foreseeable future.
Several analysts said OPEC has lost some credibility as a reliable entity to stem price declines because of its spotty follow-through on production cuts announced last year.
"OPEC could well emerge as a downward catalyst for oil prices in 2007 if its demonstrated inability to meaningfully implement stated production targets continues to worsen," Eurasia Group analyst Greg Priddy said in a research note Tuesday.
