By Eduard Gismatullin

Oct. 10 (Bloomberg) -- Crude oil fell below $60 a barrel in New York as Saudi Arabia, OPEC's largest producer, signaled to refineries in Asia and Europe that no reductions in supply will occur next month.

Saudi Aramco will meet refinery commitments in Japan, South Korea, other Asian countries and the Mediterranean region, said traders and refinery officials who received notices from the company and declined to be identified. OPEC President Edmund Daukoru brokered an informal agreement among the group's 11 members to cut production by 1 million barrels a day from Nov. 1.

There is no "confidence in the market about OPEC's decision," said Jean-Bernard Guyon, who manages the 43 million euro ($53 million) Global Energy Fund at Global Gestion France in Paris. "In the past, certain members have cheated on quotas in these circumstances."

Crude oil for November declined as much as 71 cents, or 1.2 percent, to $59.25 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $59.51 at 2:42 p.m. London time. Brent crude oil dropped 51 cents to $60.03 a barrel on the London-based ICE Futures exchange.

Merrill Lynch & Co., the world's third-largest securities firm by market value, lowered its forecast for New York-traded oil for the fourth quarter on high inventories and weak demand, Francisco Blanch, senior oil strategist, wrote today in an e- mailed report.

The average price of West Texas Intermediate will fall to $61 a barrel in the fourth quarter from $67 a barrel on concern about "very high" inventories and the possibility of a warmer-than- normal winter, Blanch said. "We've been bearish for the past three or four months on the basis of growing" fuel surplus.

OPEC Letter

Daukoru wrote a letter to members of the Organization of Petroleum Exporting Countries calling for a production cut of 1 million barrels a day to bolster prices, an OPEC spokesman in Vienna said today. OPEC will rely on an informal agreement and won't hold an emergency meeting this month, Levi Ajuonuma, a Daukoru spokesman, said yesterday.

"OPEC mailed out an invite to a production cut party and the New York Mercantile Exchange failed to repondez s'il vous plait," the Schork Group Inc. said in an e-mail. "Furthermore, the cartel's reluctance to hold a meeting to `formalize' the cut provides fodder for skeptics."

The OPEC crude oil basket price rose 39 cents to $55.52 a barrel yesterday. The daily price index is a weighted average of 11 crude blends produced by OPEC states.

The group, including Iraq, pumped 29.64 million barrels a day in September, down from 29.82 million barrels a day a month earlier, according to Bloomberg estimates. OPEC, which supplies about 40 percent of the world's oil, normally pumps more crude before the Northern Hemisphere winter, when demand peaks.

U.S. Inventories

Oil futures reached an all-time high of $78.40 in New York on July 14 on concern that fighting in Lebanon between Israel and Hezbollah would spread. Prices fell to $57.75 a barrel on Oct. 4, the lowest since Feb. 16, as the Middle East tension eased. At the same time, U.S. fuel inventories rose and fuel demand lessened with the passing of the summer vacation driving season.

Average U.S. daily demand for oil products fell 2.3 percent to 20.23 million barrels a day in the week ended Sept. 29, the lowest in seven months and the sixth consecutive decline, according to Energy Department data.

U.S. crude oil inventories held 328.1 million barrels on Sept. 29, 13 percent above the five-year average for the period, the department said last week.

The department's next report on Oct. 12 will probably show crude oil stockpiles gained 1.5 million barrels last week, according to a Bloomberg News survey of 11 analysts.

Distillate inventories, including diesel and heating oil, were probably unchanged. They held 151.5 million barrels on Sept. 29, 19 percent above the five-year average.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net