LONDON, Nov 27, 2007 (AFP) - World oil prices fell Tuesday on increasing speculation that OPEC may decide to hike crude output when the cartel meets officially next week, analysts said.

New York's main contract, light sweet crude for January delivery, shed 1.29 dollars to 96.41 dollars a barrel.

London's Brent North Sea crude for January delivery lost 1.04 dollars to 94.28 dollars a barrel.

Oil prices on Monday breached 99 dollars a barrel in New York, close to all-time highs, as the market fretted over tight supplies of crude.

However they ended lower on profit taking amid rumours that the Organization of Petroleum Exporting Countries would increase production to help cool prices.

"With prices at current levels, the market may have reason to fear a further OPEC production increase when the cartel meets on December 5 to review policy," Citigroup analyst Tim Evans said.

OPEC last decided to raise output in September when it agreed to provide an extra 500,000 barrels of crude a day to the market, which was officially made effective from November 1.

Despite pressures from developed countries, no decision on oil production was made at a rare OPEC summit earlier this month.

Although some OPEC ministers expressed concern that expensive crude would eventually dampen demand for oil, they indicated that blame for the near triple-figure price lay outside the cartel.

Traders were meanwhile awaiting the latest snapshot of US energy inventories due on Wednesday.

The US Department of Energy had last week said that reserves of US crude oil sunk by 1.1 million barrels in the week ending November 16. Analysts' consensus forecast had been for a gain of 750,000 barrels.

The DoE added that US reserves of distillates, including crucial heating fuel and diesel, had dived by 2.4 million barrels.

Many dealers expect oil-price declines to be brief because of the tight supply situation approaching the northern hemisphere winter, when demand for heating fuel spikes.

However some market players argue that oil demand could fall should the global economy weaken.

"Our concern going forward is the demand scenario," MF Global broker Robert Laughlin said. "High prices and a slowing global economy suggest that the desire for crude oil could fade."

The price of oil has surged by about 64 percent since the start of 2007, also driven by supply disruptions in key producers such as Nigeria, strong demand from China and India, and jitters over the Iranian nuclear crisis.