Dec. 4 (Bloomberg) -- Crude oil fell after an OPEC delegate said the group would discuss a production increase at its meeting tomorrow.

The Organization of Petroleum Exporting Countries, which is convening in Abu Dhabi, will consider either lifting output by 500,000 barrels a day or maintaining existing targets, according to an official who declined to be identified. Saudi Arabia's Oil Minister Ali al-Naimi said the group will study ``all options.''

OPEC ``will go ahead with a 500,000 barrel per day increase,'' Edward Meir, an analyst at MF Global Ltd. in Connecticut, said in a report today. ``However, the decision will come down to the wire, and much will ride on where prices are.''

Crude oil for January delivery fell as much as 96 cents, or 1.1 percent, to $88.35 a barrel on the New York Mercantile Exchange. The contract traded at $88.92 at 12:41 a.m. in London.

Oil rose 60 cents, or 0.7 percent, to $89.31 a barrel yesterday, leaving prices 9.6 percent below the record $99.29 reached on Nov. 21.

Twenty-three of 42 analysts, or 55 percent, expect OPEC members to maintain production at current levels, according to a Bloomberg News survey. A U.S. intelligence report that concluded Iran had halted development of nuclear weapons may have contributed to the decline in crude.

``Oil's likely to hover around $90 until we get a firm decision from Abu Dhabi,'' said Robert Montefusco, a broker at Sucden (U.K.) Ltd. in London. ``Latest intelligence on Iran shows they're a long way off creating a nuclear weapon, so the bearish tone's prevailing.''

Iran Nuclear Threat

Iran halted its nuclear weapons program four years ago and hadn't resumed it as of mid-2007, according to declassified portions of the U.S. National Intelligence Estimate released yesterday. Even if the program were resumed, Iran wouldn't be able to produce enough material for a bomb until 2010 at the earliest, the report said.

The latest assessment may complicate President George W. Bush's drive for stiffer international sanctions on the Iranian government, said White House National Security Adviser Stephen Hadley.

Any reduction in tension between the U.S. and Iran would help to limit gains in oil prices and lower the pressure on OPEC to raise production, said Steve Rowles, an analyst with CFC Seymour Ltd. in Hong Kong.

``I don't think OPEC will raise production because there has been little supply-side geopolitical tension,'' said Rowles. ``The U.S. inventory numbers out tomorrow could affect oil prices more.''

Stockpiles Fall

An Energy Department report tomorrow will probably show U.S. crude-oil stockpiles fell 900,000 barrels last week, based on the median estimate from a Bloomberg News survey of 10 analysts. Inventories held 313.2 million barrels on Nov. 23, or 3 percent more than the five-year average for the period.

Brent crude oil for January settlement traded at $89.84 a barrel, up 4 cents, on the London-based ICE Futures Europe exchange at 12:41 a.m. London time. Yesterday, it closed at a premium to the Nymex futures for the first time since July.

``Concerns about an economic slowdown in the U.S. have weighed on sentiment,'' Haris Aliefendic, an analyst with Vienna-based PVM Oil Associates GmbH said in an e-mail.

``Although WTI got some support from last week's outage at the Enbridge pipeline, Canadian supplies are rather ample and remain a bearish factor.''

Gasoline stockpiles probably gained 1.2 million barrels last week, while distillates, including heating oil and diesel, probably declined by 150,000 barrels, based on the survey.

Oil prices plunged last week after crude oil stockpiles fell less than forecast, even as refiners unexpectedly increased operating rates to a 10-week high. Analysts say refining rates may have risen to 89.5 percent, the fourth gain in five weeks.