Oil drops on report Saudi mulling output hike
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NEW YORK (Reuters) - Oil prices fell on Friday on a report that Saudi Arabia may increase production to stem crude's record rally to peaks near $140 a barrel.
U.S. crude oil settled down $1.88 at $134.86 a barrel, while Brent crude settled $1.84 lower at $134.25 a barrel.
Saudi Arabia is considering bringing output to near record levels of around 10 million barrels per day ahead of a meeting of producer and consumer nations in Jeddah on June 22, the Middle East Economic Survey reported on Friday.
The world's top oil exporter is expected to pump 9.45 million bpd this month, after announcing in May plans to increase output by 300,000 bpd to make up for production shortfalls by other members of the Organization of Petroleum Exporting Countries.
"Saudi Arabia is trying hard to talk the market down," said John Kilduff, senior vice president at MF Global.
Separately, Saudi Oil Minister Ali al-Naimi, speaking to the state news agency SPA, reiterated that market fundamentals did not justify current prices and that producers and consumers would seek a solution in Jeddah.
"The kingdom called this meeting based on its positive role in international relations ... and its commitment to the world economy and a balanced global oil market," Naimi said.
Oil prices have jumped 40 percent this year to a record above $139 a barrel, causing protests around the world.
Prices have jumped more than six-fold since 2002 as supply struggles to keep pace with demand in emerging markets, especially China and India.
Further support this year has come from a wave of cash from investors seeking a hedge against rising inflation and the falling dollar.
Oil demand growth has shown signs of faltering under high prices.
OPEC on Friday became the latest group to cut its forecast for global growth in oil demand in 2008, adding that it is pumping more than the forecast demand for its oil.
The International Energy Agency this week cut its demand growth forecast for 2008 to 800,000 bpd.
(Reporting by Matthew Robinson, Robert Gibbons, Gene Ramos in New York; Santosh Menon in London; Baizhen Chua in Singapore; Editing by Walter Bagley)
