Oil prices dropped nearly $1 a barrel Monday as OPEC ministers said they would keep their 28 million barrel-a-day production target steady.
The decision to keep supplies pumping was yet another argument for supplies outpacing demand a market sentiment that has pushed crude oil prices down about 16 percent from their all-time record reached in mid-July.
OPEC maintains about 2 million barrels a day of spare capacity, and stocks are high elsewhere. The U.S. Department of Energy said last week that crude inventories have hit their highest levels since 1998.
"When supply exceeds demand, commodities have one way to go, and that's down," said Oppenheimer & Co. analyst Fadel Gheit. "Barring a global crisis, or a major supply disruption, I think the trend will continue."
Light, sweet crude for October delivery fell 98 cents to $65.27 a barrel in midday trading on the New York Mercantile Exchange, after dropping as low as $64.85 earlier in the day. The contract had fallen $1.07 Friday to settle at $66.25 a barrel the lowest closing price since finishing at $66.23 on April 6.
OPEC did leave open the possibility of an output cut later this year with a promise to monitor market conditions that have driven oil prices to five-month lows. Some OPEC members, including Iranian Oil Minister Kazem Vaziri Hamaneh, suggested that prices shouldn't be allowed to fall below $60 a barrel, reports AP.
But according to Gheit, crude prices would have to fall below about $55 a barrel before OPEC would start worrying about members' revenue.
"Oil prices are still higher than a year ago, double where they were three years ago, and three times the support level OPEC established for itself five years ago," Gheit said. "OPEC is in no hurry to cut production, because they still think, why panic? We never thought we'd have $60 oil ... They are likely to overstay their welcome, if you will, and saturate the market with excess crude."