By Sarah McFarlane and Dan Molinski

Oil prices fell Friday after a report indicated major producers meeting this weekend in Algeria may decide to raise oil production levels significantly to combat tightening supply.

Light, sweet crude for November delivery was 0.2% lower at $70.21 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, fell 0.3% to $78.01 a barrel.

A monitoring committee meeting on Sunday between the Organization of the Petroleum Exporting Countries and nonmembers, including Russia, is expected to feature discussions around offsetting lower Iranian exports with production elsewhere. Added production could have the effect of lowering oil prices, though much would depend on the size of any output increase.

Oil prices had been rising sharply early Friday morning ahead of the meeting. But a headline by Reuters, citing unnamed sources, indicated that OPEC and nonmembers will be discussing another possible output increase at the meeting, somewhere along the lines of 500,000 barrels a day.

That 500,000-barrel-a-day level would be just about the amount that Iran's oil shipments have fallen between April and August ahead of U.S. oil sanctions that officially begin in November, according to data from the International Energy Agency.

President Trump inserted Washington's position into the discussion on Thursday, posting a tweet that said OPEC should stop constantly pushing for higher oil prices, and demanding that "the OPEC monopoly must get prices down now!"

U.S. oil prices have risen by $20 a barrel over the past 12 months, helping send the average gasoline prices for drivers in the U.S. toward a multiyear high of $2.88 a gallon Friday. That is 30 cents a gallon more than this time last year, according to price-tracking firm GasBuddy

Steward Glickman, head of energy research at CFRA Research, said such tweet-storms by Mr. Trump on oil prices in advance of the U.S. midterm elections in November could pressure the Saudis to expand production. But he said that doesn't mean that the Saudis can or will do so.

"We are not optimistic that Saudi Arabia will agree to sharply boost production, even as it owns the lion's share of global spare capacity, around 60%, per the IEA," Mr. Glickman said before Friday's report of a possible output increase. "The problem? Opening up the spigots might not be sustainable and imperil long-term production capabilities."

Russia and Saudi Arabia already ramped up production this summer to compensate for some of the lost Iranian barrels, but other analysts agree that additional production capacity may be limited.

Goldman Sachs forecast a near-term Brent price of $80 a barrel in a note, citing strong U.S. demand growth combined with constrained domestic production, and losses from Iran due to sanctions.

Later Friday, analysts will be watching for the latest weekly report by Baker Hughes on U.S. drilling activity. Last week's report showed the number of active rigs in the U.S. targeting oil rose by seven to 867, which is a strong rebound after recent declines. Still, the 867 total remains inside a rather tight, four-month-old range between 858 and 869 oil rigs, which suggests overall activity remains subdued.

Among refined products, gasoline futures for October delivery fell 0.1% to $2.013 a gallon. Diesel futures fell 0.3% to $2.2243 a gallon.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Dan Molinski at Dan.Molinski@wsj.com

(END) Dow Jones Newswires

September 21, 2018 12:28 ET (16:28 GMT)

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