LONDON (AFP)--The Organization of Petroleum Exporting Countries, which pumps 40% of the world's crude, risks oversupplying the market if it decides to increase output at a policy meeting this week, analysts said.
But leaving output quotas unchanged could send oil prices to fresh record highs and even above the psychological $100-a-barrel mark for the first time, they added.
Member OPEC nations will be holding an official output meeting in Abu Dhabi on Wednesday, with uncertainty surrounding the outcome of their decision.
"With the economic problems hanging over the global economy now, OPEC's probably thinking that (oil) demand is more likely to go down than up in terms of current forecasts and they'll probably want to keep things steady" regarding output, said Simon Wardell, an oil expert for Global Insight, an independent analyst group.
Veronica Smart, an analyst at the Energy Information Centre consultancy, said that while OPEC would find it hard to justify doing nothing with production quotas should prices remain around $90 a barrel by the time of its meeting, the cartel was likely to keep output on hold.
"If OPEC did decide to increase production levels it probably wouldn't come into effect until Jan. 1 or perhaps Feb. 1 and it might be seen as a little bit too little too late," she noted.
Such a decision would place extra oil onto the market towards the end of the northern hemisphere's winter, when demand for heating fuel drops, and ahead of the second quarter when OPEC doesn't like to see a large build-up of inventories, Smart said.
"If OPEC decided to do nothing...they probably would be some bullish (price) impact on the market," the analyst added.
"You can argue that (no change to output) could be used to have a bull run to $100."
World oil prices have slumped last week on increasing speculation that OPEC may decide to hike crude output on Wednesday.
OPEC last decided to raise production in September when it agreed to provide an extra 500,000 barrels of crude a day to the market, which took effect Nov. 1.
Although some OPEC ministers have expressed concern that expensive crude could also dampen demand for oil, they reject blame for the nearly triple-digit prices.
Instead the cartel argues they are the result of speculators being drawn to the market on geopolitical tensions, such as between crude-producer Iran and the U.S.
"There is a huge element of speculation in the market," said Smart. "However, the speculation is largely around supplies and if OPEC were producing perhaps slightly more, that would take some of the fear premium out of the market."
Saudi Oil Minister Ali Al-Nuaimi last Wednesday insisted the world oil market was well supplied and that high prices didn't properly reflect the supply-demand situation.
Asked whether Saudi Arabia, the world's biggest oil exporter, would push for an increase in production in Abu Dhabi, Nuaimi said the cartel would first need to see market data.
Qatari Energy Minister Abdullah al-Attiyah, asked by AFP Saturday whether OPEC ministers will discuss raising production at their Wednesday meeting, said: "No."
"If you want to bring (oil) prices down, certainly it would help if they (OPEC) increased production," said Wardell of Global Insight.
"But I think if they did do that, if you do end up having a mild winter and production by OPEC is stepped up and global economic growth is significantly lower ... I think you do end up in a situation where inventories could build up and you could see prices fall quite a lot."
OPEC would want to avoid such a situation, since its revenues would slide, Wardell said, adding that he didn't think the cartel would raise output on Wednesday.
OPEC comprises Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
OPEC members that are bound by production limits have an official daily output target of 27.2 million barrels of oil. Angola, Ecuador and Iraq are not included in the quota system.