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Even OPEC says oil is inflated...
Oil resumes slide on OPEC comments
Cartel president says there is adequate supply and prices are much too high.
July 29, 2008: 9:45 AM EDT
Oil prices have fallen more than 15% since setting a record on July 11, but prices remain nearly 65% higher than a year ago.
NEW YORK (CNNMoney.com) -- Oil prices fell below $124 a barrel Tuesday after OPEC's president said crude prices were abnormally high and that high prices did not result from lack of supply.
Light sweet crude for September delivery fell 86 cents to $123.87 a barrel in electronic trading after Chakib Khelil, president of the Organization of Petroleum Exporting Countries, told reporters in Jakarta, Indonesia, that the oil markets were being adequately supplied, and that prices were being inflated by geopolitical tensions.
"If the dollar continues to strengthen and the political situation [with Iran] improves, then the long-term prices will be about 78 dollars (a barrel)," said Khelil, according to reports.
Khelil, who is also the oil minister for Algeria, spoke to reporters while visiting Indonesia's energy minister.
The threat of a conflict between the West and Iran has raised major concerns about supply from the Middle East. However, there has been little saber rattling from either side since they met to discuss the oil producer's nuclear program over a week ago.
"Comments out of somebody like this definitely carry a lot of weight, especially with the market so nervous," said Neal Dingmann, senior energy analyst at Dahmlan Rose & Co.
Price drop: Crude prices have fallen by double digits over the past two weeks as oil investors worried that high prices for fuel made from crude oil have seriously damaged demand.
Average prices for regular gasoline in the U.S., the world's largest oil consumer, fell for the 12th straight day Tuesday, but remained near $4 a gallon - more than 36% higher than they were a year ago.
Oil has fallen 15% from its trading peak of $147.27 set July 11, though prices remained nearly 65% higher than they were 12 months ago.
"The market is more focused on the fundamental economics aspects than the geopolitical aspects," said Tom Orr, head of research at Weeden & Co.
Nigeria: Worries about a demand slide also overshadowed disruption in demand from Nigeria, Africa's largest oil producer.
Prices spiked in early trading after reports revealed that militants in Nigeria had damaged two oil pipelines operated by Royal Dutch Shell (RDS.A), but then retreated.
Rebel attacks on Nigeria's oil infrastructure have been a constant concern for oil investors, and a factor that some analysts believe is already included in the market price.