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Oil Falls a Second Day on Speculation OPEC Is Increasing Output

By Trisha Huang and Gavin Evans

Nov. 27 (Bloomberg) -- Crude oil fell for a second day in New York on heightened speculation OPEC will increase output as record prices threaten to stifle economic growth.

Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, is pumping more than 9 million barrels a day, CNBC reported, citing the country's oil ministry. That's more than its average daily output of 8.6 million barrels, according to Bloomberg data. OPEC may raise output by 1.1 percent this month, according to PetroLogistics Ltd.

``The expectation that OPEC may boost output at next week's meeting has taken some steam out of oil's bull run,'' said Victor Shum, senior principal at energy consultant Purvin & Gertz Inc. in Singapore. ``OPEC exceeded their output target in November in response to high prices.''

Crude oil for January delivery fell as much as $1.09, or 1.1 percent, to $96.61 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $97.09 at 2:06 p.m. in Singapore.

The contract fell 48 cents, or 0.5 percent, to $97.70 a barrel yesterday. It reached $99.29 on Nov. 21, the highest since trading began in 1983.

``People are worried the economy is going to slow down,'' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. OPEC ``should be worried about growth.''

Retail Slowdown

The Standard & Poor's 500 Index dropped to a 14-week low yesterday on signs shoppers in the world's largest oil consumer are cutting spending. The National Retail Federation is forecasting the slowest increase in U.S. holiday season sales in five years, after a survey showed shoppers spent 3.5 percent less per person at Thanksgiving weekend. About 147 million customers visited shops, 4.8 percent more than a year earlier.

``Recession or not, things are slowing down in the U.S. materially,'' said Jan Stuart, oil economist at UBS AG in New York. ``Twenty-five percent of the global oil market still is North America'' so it does count, he said. UBS is forecasting a decline in New York prices to an average $74 a barrel next year.

Brent crude oil for January settlement fell as much as 92 cents, or 1 percent, to $94.40 a barrel on the London-based ICE Futures Europe exchange. It was at $94.80 at 2:01 p.m. Singapore time. It dropped 0.5 percent to $95.32 yesterday.

OPEC pumps about 40 percent of the world's oil and will review its output quotas at a meeting in Abu Dhabi on Dec. 5. It agreed in September to add an extra 500,000 barrels a day starting Nov. 1 to bolster supplies going into the peak winter demand period. That would increase output for the group's 10 quota-controlled members to 27.2 million barrels a day.

Latest Output

``The shipping data indicates that increases may have been around 700,000 barrels per day in November,'' said Purvin & Gertz's Shum. ``It's not unusual for members to produce beyond their target.''

Those nations pumped 27.14 million barrels a day last month, out of a group total of 31.16 million, according to a Bloomberg survey of analysts and producers.

OPEC will probably raise output to 31.6 million barrels a day this month, according to early estimates by PetroLogistics, a Geneva-based consulting firm.

Uncertainty around the extent of any OPEC increase and scope for further U.S. stockpile declines may limit any slide in prices before the Abu Dhabi meeting, said Altavest's Hartmann.

``The bottom may be $94-$92,'' he said.

An Energy Department report tomorrow may show U.S. supplies fell 750,000 barrels last week, based on a Bloomberg News survey of 11 analysts.

Inventories declined four of the past five weeks, and cheaper forward prices will continue to discourage refiners from increasing them, Hartmann said.

To contact the reporters on this story: Trisha Huang in Singapore at thuang14@bloomberg.net ; Gavin Evans in Wellington at