Oil Prices Drop in Asian Trading By Gillian Wong, Associated Press Writer

SINGAPORE (AP) -- Oil prices dropped Tuesday after a key OPEC member left open the possibility the oil cartel will increase output to curb rising prices, and following the strengthening of the U.S. dollar overnight.Saudi Arabian Oil Minister Ali al-Naimi said production will be discussed when the Organization of Petroleum Exporting Countries meets next month in Abu Dhabi in the United Arab Emirates.

Light, sweet crude for December delivery fell 6 cents to US$94.56 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell US$1.70 to settle at US$94.62 a barrel Monday.

The long-term impact of another increase in oil production by OPEC isn't clear. A previous 500,000 barrel a day increase in production, which went into effect Nov. 1, was widely viewed as too little too late to stop crude's run-up to near $100 a barrel. Crude prices rose 42 percent between late August and last week, when they reached a record of US$98.62 a barrel.

A rebound in the U.S. dollar Monday also pressured crude prices. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the U.S. currency is falling. Many analysts blame speculative investing driven by the falling dollar for the rally in crude prices over the past two-and-a-half months.

Oil prices were dampened as well by worries over the U.S. economy as Wall Street fell its fourth straight session on expectations of further fallout from the ongoing credit crisis. The Dow Jones industrials ended below 13,000 for the first time since August.

Oil prices could be volatile this week due the expiration of crude options on Tuesday and the expiration of the December crude contract Friday.

Investors will have plenty of additional supply and demand data to chew on. On Tuesday, the International Energy Agency will issue its monthly report on crude supplies and demand. On Thursday, the Energy Department's Energy Information Administration will issue its weekly inventory report.

The EIA report is expected to show U.S. crude oil inventories fell 300,000 barrels last week, according to the average estimate of analysts polled by Dow Jones Newswires. Gasoline inventories, on average, likely fell 100,000 barrels, while distillate stocks were expected to fall 300,000 barrels. Refinery use likely rose 0.7 percentage point to 86.9 percent of capacity.

In London, December Brent crude fell 58 cents to US$91.40 a barrel on the ICE Futures exchange.

Heating oil futures fell 0.05 cent to US$2.5816 a gallon (3.8 liters) while gasoline prices fell 0.7 cent to US$2.4095 a gallon.

Natural gas futures rose 0.3 cent to US$7.964 per 1,000 cubic feet.