Nov. 27 (Bloomberg) -- Crude oil fell more than $3 a barrel in New York after Saudi Arabia's oil minister, Ali al-Naimi, said the country increased production to the highest this year.

Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, is pumping 9 million barrels a day, al-Naimi said in Singapore today, the most in more than a year. Prices also fell on speculation that slower economic growth in the U.S. and Europe will cut fuel consumption.

``The combination of a slowing economy and signs of increased OPEC output is putting pressure on prices,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``A lot of traders thought we would breach $100 on Wednesday, Friday and again yesterday and it didn't happen. We are now seeing a lot of them exit the market.''

Crude oil for January delivery fell $3.28, or 3.4 percent, to settle at $94.42 a barrel at 2:47 p.m. on the New York Mercantile Exchange. It was the biggest decline since Nov. 13. Oil hasn't fallen below $90 since Oct. 31. Futures reached $99.29 on Nov. 21, the highest price since trading began in 1983. Prices are up 57 percent from a year ago.

New York crude-oil futures, which have averaged $70.48 a barrel this year, are heading for a record annual average price. Oil will average $71.05 in the fourth quarter and $69.50 next year, according to the median of 25 price forecasts gathered by Bloomberg News.

``The bigger issue as far as the oil market is concerned is the economy, as opposed to supplies,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``OPEC said they were going to increase production in November, so it shouldn't be a surprise.''

OPEC Production

OPEC agreed at a Sept. 11 meeting in Vienna that the 10 members of the group with production targets, all except Angola and Iraq, would increase output by 500,000 barrels a day to 27.253 million barrels starting Nov. 1. Members will discuss production for the first quarter of 2008 at a meeting in Abu Dhabi on Dec. 5.

The producer group is discussing a 750,000-barrel-a-day increase in production because of concerns about the effect of oil prices on the U.S. economy, Dow Jones Newswires reported, citing an OPEC delegate it didn't identify.

There is ``a lot of concern'' about a possible U.S. recession with oil prices at current levels, Dow reported the delegate as saying.

OPEC will probably increase output 1.1 percent to 31.6 million barrels a day this month, according to preliminary estimates by PetroLogistics Ltd.

January Options

Bets that January crude oil will fall below $85 a barrel were the most actively traded options contracts on the Nymex today. The put contracts, which represent the right to sell oil at that price, rose 13 cents to 35 cents, or $350 per contract, according to data compiled by Bloomberg as of 3:26 p.m. New York time. One options contract is for 1,000 barrels of oil.

``The equity markets are signaling that crude-oil prices should fall,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``The stock market is in full-blown correction mode. The rally in oil was in large part based on a robust economic outlook.'' U.S. Stock Market

The S&P 500 and Dow average dropped the most in two weeks yesterday, leaving both indexes more than 10 percent below their October all-time highs. Stock indexes have tumbled as banks and other financial firms reported more than $50 billion of mortgage- related losses and writedowns.

Both indexes are up more than 1 percent in trading today.

Recession Risk

U.S. consumer confidence fell more than forecast in November as Americans struggled with surging fuel costs and falling home prices. The Conference Board's confidence index decreased to 87.3, the lowest since the aftermath of Hurricane Katrina in October 2005, from a revised 95.2 the prior month, the New York- based group said today. The index averaged 105.9 last year.

Goldman Sachs Group Inc. said the U.S. Federal Reserve will slash its benchmark rate to 3 percent by the middle of next year to head off a recession. The risk of the economy contracting for two straight quarters has risen to between 40 percent and 45 percent, Goldman said. The U.S. consumes a quarter of the world's oil output.

``The oil market is due for a correction,'' said James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. ``Tomorrow's DOE numbers are key. If we don't get a decline of a couple million barrels, we could work down to $90.''

Crude-oil stockpiles fell 1 million barrels in the week ended Nov. 23, according to the median of responses by 17 analysts surveyed by Bloomberg News before the release of an Energy Department report tomorrow.

Brent crude oil for January settlement declined $2.80, or 2.9 percent, to close at $92.52 a barrel on the London-based ICE Futures Europe exchange. Brent reached $96.65 a barrel yesterday, the highest since trading began in 1988.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: November 27, 2007 16:20 EST