OPEC left to its own devices

CBS MarketWatch :

Commentary: Hedge fund redemptions lay bare the role in oil speculation

The following First Take is real-time analysis and opinion by the MarketWatch commentary team.

SAN FRANCISCO (MarketWatch) -- The Organization of Petroleum Exporting Nations has called an emergency meeting for Oct. 24 aimed at halting a precipitous drop in oil prices.

Excerpt:

"As the industrial world withdraws into a recessionary shell, it takes oil demand with it. China and India's insatiable thirst for oil looks meager now as factory output slows to a trickle.

But there's also been a rush of roving capital out of the market. According to the latest data from Hedge Fund Research, third-quarter hedge fund redemptions hit a record-high $210 billion, spearheading an exodus wealth that burst one of the biggest commodities bubbles of all time. See full story.

It's no coincidence that oil prices plunged in tandem with these record withdrawals, exposing for all to see just how much of the summer's oil-price spike was driven by speculators.

While oil's deep "correction" alarms Big Oil, it's even more alarming to producing nations whose economies are entirely grounded in petro-dollars.

The extreme pain caused by this sudden revenue loss can be gauged by OPEC's decision to move up their next meeting from November to October, less than two weeks ahead of the U.S. presidential election. This raises the likelihood of another severe tongue-lashing by a politically supercharged Washington, but that's clearly better than enduring further losses.

This time, however, OPEC is on its own."

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