Saudis mull oil supply increase

Opec members are under pressure to raise production

Oil prices have fallen because of reports that Saudi Arabia is considering boosting oil production.

US light, sweet crude fell almost $4 to $133.46 during trading in New York.

A report suggested Saudi Arabia could increase its output by more than half a million barrels of oil per day to a record 10 million barrels per day.

Meanwhile the Saudi oil minister said current high oil prices - which hit a record high of more than $139 a barrel last week - were unjustified.

Oil minister Ali al-Naimi said a meeting of oil exporters and importers to be held in Jeddah later this month would seek a solution to the unprecedented high prices, the Saudi state news agency said.

Earlier on Friday, oil was trading at over $137 a barrel despite Opec once again cutting its forecast for daily global oil demand this year.

US light, sweet crude later settled at $134.86, down almost $2.

'Ample supply'

Opec, which remains under fierce pressure to pump more oil to curb soaring prices, reduced its forecast for global oil demand for the third time this year.

It now expects global demand for oil to rise by 1.1 million barrels a day in 2008, 60,000 barrels less than previously expected.

Opec's latest change in its outlook was due to the weak US economy but also the impact of rising oil prices on demand.

There are still many supply side concerns that will continue to support prices at high levels Victor Shum, Purvin and Gertz

In its latest monthly market report, the producers body reiterated its view that the market was "amply supplied" with oil and prices did not reflect the balance of supply and demand.

It noted that Opec members were currently producing more oil than necessary to meet expected market demand but that supplies from non-Opec members were set to be lower than previously forecast this year.

Energy analysts said the main factors behind the recent spectacular climb in oil prices - the weak dollar, the ever-present threat of disruption to supplies in the Middle East and Nigeria and buoyant demand for energy in China and India - were still prevalent.

"The overall market trend is still upward," said Victor Shum, from Purvin and Gertz.

"There are still many supply side concerns that will continue to support prices at high levels."