NEW YORK (CNN/Money) -
Oil prices eased further Tuesday as the head of OPEC said there was plenty of crude on the market and U.S. gasoline demand passed its summer peak with the close of the Labor Day holiday.
Traders are also switching their focus to heating fuels ahead of winter in the northern hemisphere.
U.S. light crude for October delivery fell 96 cents to $43.03 a barrel, in the first day of trading on the New York Mercantile Exchange following the three-day Labor Day weekend holiday.
London Brent crude fell 20 cents to $40.42 a barrel, following a 61-cent drop on Monday. Brent prices now stand nearly five dollars below the $45.15 record high hit last month.
"The drop in prices is long overdue," said Fadel Gheit, an oil analyst with Oppenheimer.
"Speculators pushed the prices beyond even the most bullish estimates, because they exaggerated (supply shortage fears), but now I think we see the party's over."
OPEC President Purnomo Yusgiantoro said in Sydney that global markets now see a crude oil oversupply of about 1.5 million barrels per day (bpd).
"If you look at the supply and demand balance, the world has enough oil," Yusgiantoro was quoted by Reuters as saying. "Why is the price so high? It's the political premium," he said.
OPEC meets on Sept. 15 to set supply policy for the fourth quarter.
UAE Oil Minister Obaid al-Nasseri, speaking in Abu Dhabi, echoed that sentiment, saying that OPEC would discuss raising its official production limits when it meets next week in Vienna. But, he said, OPEC had already done all it could to cool oil prices by pumping nearly flat out.
And top world oil exporter Saudi Arabia, estimated to have pumped 9.5 million bpd in August, up 250,000 bpd from July, has pledged to supply customers with all the crude they want to stem this year's price rally, Reuters reports.
The news agency also said the country slashed prices for westbound shipments of October-loading crude in an effort to entice buyers.
How low will crude go?
Gheit said prices still need to come down at least $10 from current levels, to about $32 a barrel in order to be in line with market fundamentals. Other analysts do not expect prices to fall far, citing fast-growing world demand and tight spare-production capacity.
The oil-price focus will soon shift to heating oil ahead of winter in major oil consuming nations, including the U.S., Japan and China.
According to Reuters, the U.S. government said last week that national crude stocks hit their lowest level in five months, while distillate supplies, which include heating oil, rose two million barrels to stand at a 1.2 million barrel surplus versus a year ago.
"If we don't have a particularly cold winter, we won't see prices rise dramatically," said Gheit.
Despite Gheit's optimism that prices will come down and stay down, wild cards still remain that could drive prices higher with little warning, particularly production disruption in political hot spots around the globe.
Most notable among these flashpoints is Iraq, which has suffered attacks on oil pipelines in the north and the south.
While the threat to U.S. oil production in the Gulf of Mexico faded after Hurricane Frances fizzled out, Royal Dutch/Shell still evacuated some oil and gas rigs off Trinidad and Tobago because of another storm, Hurricane Ivan, which is heading across the Atlantic towards Barbados and eastern islands in the Caribbean.
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