Oil Falls on Prospect of OPEC Supply Increase


Oil fell on Monday on expectations OPEC may increase output to help stem a record rally that has sent prices near $100 a barrel.

Iran's Oil Minister Gholamhossein Nozari said at the weekend that some members of the Organization of the Petroleum Exporting Countries were advocating an increase in production when the cartel meets in Abu Dhabi on December 5.

"Some countries agree with output increase and others believe there is a good balance between oil supply and demand," he told a news conference.

U.S. oil fell 32 cents to $97.86 a barrel by 1:08 p.m. ET, after trading as high as $99.11 earlier, close to the record $99.29 a barrel hit last Wednesday.

London Brent crude traded down 39 cents to $95.37 a barrel after hitting a record $96.65 earlier in the session.

The weak dollar, expectations of a cold winter, plus investment inflows into energy are reasons behind an increase in average forecasts for oil prices next year to about $75 a barrel, from an average of $70.20 so far this year, according to a Reuters monthly poll.

The onset of colder weather in the U.S. Northeast, a major consumer of heating oil, has also contributed to the upswing in prices as traders bet higher winter demand will strain below-normal inventories.

Temperatures in the region on Monday were near their norms for this time of year, according to The Weather Channel Web site (www.weather.com), but the U.S. National Weather Center's six to 10-day outlook calls for colder-than-usual conditions.

The United States has urged OPEC to boost production because of shrinking oil inventory levels in developed economies in the run up to the northern hemisphere winter.

OPEC agreed in September to raised output by 500,000 barrel per day (bpd), but this has so far failed to stem oil's advance.

Most members have said markets are well supplied and extra oil would not cool prices.


Reuters
11/26/2007 12:32:51 PM