Oil slips below $135 after OPEC questions high price

NEW YORK -- Oil prices pulled back Friday after OPEC questioned whether crude can remain so high through the rest of the year and the dollar gained against the euro. Meanwhile, U.S. filling station operators pushed average gas prices deeper into record territory.

Light, sweet crude for July delivery fell $1.88 to settle at $134.86 on the New York Mercantile Exchange.

In its monthly market report, the Organization of Petroleum Exporting Countries said oil's recent volatility "reconfirms the view that current price levels do not reflect supply and demand realities."

Looking ahead to the second half of the year, the cartel added: "A review of the prospects ... also shows little support for prices to remain at current levels."

OPEC lowered its 2008 global demand forecast, saying it now expects demand to increase 1.28% to an average of 86.9 million barrels per day, down from a previous forecast of 1.35%. That decision follows similar moves by the U.S. Energy Department and the International Energy Agency earlier in the week.

"It tells me that demand is slowing and it could accelerate if prices don't come down soon," Phil Flynn, an analyst at Alaron Trading in Chicago, said of the revised forecasts. "It's a sign that maybe the bull run could come to an end. You don't want to say that for sure, but you're starting to see some shifts."

Oil prices were also pressured by speculation that Saudi Arabia may boost production following a report in the Middle East Economic Survey, an industry publication.

Crude prices have fluctuated widely since they surged nearly $11 in a single session to a trading record above $139 a week ago. The price for a barrel has swung back and forth in a $10 band since then.

Some investors believe prices could yet push higher. Analysts call oil's current wavering "range-trading," as traders await direction from a significant move in the dollar or change in supply and demand fundamentals.

"There is no driver out there to cause prices to break out of this range yet," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The overall market trend is still upward. There are still many supply side concerns that will continue to support prices at high levels."