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Crude Pulls Back on Demand Estimate

OPEC lowers its prediction for 2005 worldwide consumption.

Updated from 1:09 p.m. EDT

Crude futures fell Thursday as predictions for global energy demand continued to come down.

Crude for October delivery, which jumped nearly $2 Wednesday, closed down 34 cents to $64.75 a barrel on Nymex. Gasoline futures fell 4 cents to $1.89 a gallon.

In its monthly report for September, OPEC lowered its estimate for worldwide oil demand in 2005 by 150,000 barrels to 83.49 million barrels, citing downward revisions to earlier estimates and the impact of higher energy prices.

The cartel is scheduled to meet next week to discuss a 500,000-barrel increase in its formal production quotas. Qatar Energy Minister Abdullah al-Attiyah expressed skepticism that the increase will do anything to cool prices,



"The sharp demand for products is the reason behind the rise and not demand for crude oil," al-Attiyah said.

The International Energy Agency said on Thursday it would not release more oil from its strategic reserves, saying that any additional supplies were unnecessary.

Natural gas, which has been trading in a record-high range of $10 to $12 per thousand cubic feet since Katrina hit, closed up 25 cents to $11.42 per thousand cubic feet.

The Energy Department reported Thursday that gas in underground storage rose more than expected, by 89 billion cubic feet. Analysts on average were expecting a build of 65 billion cubic feet.

Hurricane Katrina curtailed nearly 3.2 billion cubic feet a day of natural gas, destroying numerous platforms and pipelines.

"Natural gas is the big deal," said Bill O'Grady, assistant director of market analysis at A.G. Edwards. "We've been injecting gas into storage at a slower than average pace throughout the summer, and what helped this was a particularly hot summer."

"As long as you are injecting less than average, that is bullish for the market. People fear of a shortage in case this winter turns out to be colder than average," O'Grady said

On Wednesday, crude oil prices surged after the Energy Department reported stocks fell by a greater-than-expected 6.6 million barrels. Distillates, which include diesel and heating oil fell by 1.1 million barrels though analysts were expecting a build in that category.

"Yesterday's jump in oil prices was more of a short-covering than anything else," according to O'Grady. "We had a major support zone at $62.80 to o$63 a barrel in which everyone jumped in to cover their shorts."

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