Crude Dips as OPEC Waffles

Updated from 10:42 a.m. EST

Oil prices slipped below $63 a barrel Monday on expectations that cold weather blanketing the country will not last and that the Organization of the Petroleum Exporting Countries will not trim production deep enough to prop up prices.

Light, sweet crude for January delivery shed 99 cents to settle at $62.44 a barrel on profit-taking and an increase in the U.S. dollar. On Friday, oil prices closed up 30 cents at $63.43 on the rising possibility that OPEC will again trim production at its next meeting this month.

Brimming domestic supplies and a weak U.S. dollar are some of the factors why OPEC is considering additional output cuts. The cartel prices crude in dollars and makes less money when the currency is low. This year, the dollar has lost over 10% against the euro as the U.S. economy weakened. On Friday, the dollar touched a 20-month low vs. the euro, which was recently trading at $1.3324 vs. $1.3336 late Friday.

"We cannot ignore the extremely soft dollar amongst other factors," OPEC President Edmund Daukoru told the BBC Monday.

Oil prices have ricocheted between $57 and $62 over the past month as OPEC members alternatively discounted or supported additional production cuts. The group, which controls about 40% of the world's crude, trimmed output starting in November by 1.2 million barrels a day and will consider additional reductions at its next meeting on Dec. 14.

However, some energy analysts and traders believe OPEC has cut daily output by at most 800,000 barrels to protect their profits. OPEC member countries have denied this assertion and said they have cut production across the board.

High domestic levels of supplies have reduced the impact of OPEC's production cut and increased the likelihood that the cartel will need to decrease output further. Oil and natural gas stockpiles are nearly 6% above the same period last year and will likely remain high until the country has sustained cold weather. Natural gas is used by some utilities to generate electricity, while crude is processed into fuels like heating oil.

Over the weekend, Iran's oil minister called for the group to slash output by 500,000 to 1 million barrels per day. Other ministers from Nigeria, Qatar and Saudi Arabia have all voiced their support of additional reductions. But Libya and Kuwait disagreed and said export decreases are unnecessary so long as oil prices remain above $60.

OPEC members typically voice their opinions ahead of meetings to blunt the impact of their decision and to keep prices from swinging wildly.

The National Weather Service predicts in its 10-day outlook that warmer-than-average temperatures will cover the entire country beginning this Saturday. A cold front traveled across the country last week, pushing down prices and bringing snow and ice to parts of the Midwest.

The expectation of warm weather returning was pushing down heating fuels. Natural gas declined 61 cents to $7.80 per million British thermal units, and heating oil dipped 3 cents to $1.80 a gallon.

Wholesale unleaded gasoline lost 1 cent to $1.66 a gallon.

Energy stocks were losing ground, with the Amex Oil Index recently down by 0.5%, led by Sunoco(SUN Quote), Valero Energy(VLO Quote), Occidental Petroleum(OXY Quote) and BP(BP Quote).

Exxon Mobil(XOM Quote), the country's largest publicly traded energy company, was up 0.1% to $77.29.