Oil below $ 99 on prospect of OPEC supply rise

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LONDON, Nov 26 (Reuters) The weak U.S. dollar helped oil rise above a barrel on Monday, closing in on the 0 milestone, but it retreated from session highs on expectations that an OPEC meeting next week could decide to increase supply.

Iran's Oil Minister Gholamhossein Nozari said at the weekend that some OPEC members were advocating an increase in production when they meet in Abu Dhabi on Dec. 5 to debate whether to raise output for a second time this year.

U.S. light, sweet crude for January delivery was down 2 cents at .16 by 1244 GMT, within striking distance of the all-time high of .29 from last Wednesday.

London Brent crude was 3 cents up at .79 a barrel after reaching a new record high of .65 earlier in the session.

''We believe the markets have yet to discount the outcome of the OPEC meeting, where there will be immense -- and we believe ultimately successful pressure -- on the cartel to raise quotas,'' said Edward Meir at futures broker MF Global.

Oil has risen more than 40 percent since August, boosted by a decline in the U.S. dollar to a series of record lows versus the euro that has spurred buying of oil, gold and other commodities.

The dollar edged back towards last week's record troughs versus the euro on Monday as investors saw little reason to change their bearish view on the U.S. economy or expectations of more Federal Reserve interest rate cuts.

''The questions are: where does the U.S. dollar go and are we going to see more demand out of the U.S. as it starts to get cooler,'' said Peter MacGuire, managing director of Commodity Warrants Australia in Sydney.

The onset of colder weather in the U.S. Northeast, a major consumer of heating oil for household use, has contributed to the upswing in prices as traders bet higher winter demand will strain inventories that are lower than normal.

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

Iranian minister Nozari said opinion among OPEC ministers regarding an output boost was divided.

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

Most members have said publicly that they don't believe more oil is needed, or that an increase would not cool prices.

The United States has urged OPEC to boost production because of shrinking oil inventory levels in developed economies and to help bring down prices that have surged to record levels.


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