After getting off to a strong start earlier in the session, oil prices have traded lower in mid-day action on a growing assumption that OPEC will elect to raise its output quota during next week's meeting. It should come as no surprise really that we are starting to hear some OPEC rumors considering that oil prices have ballooned by over 40% since August and have been testing even inflation-adjusted all time highs in its pursuit of the $100 mark.

As fellow BloggingStocks writer Joseph Lazzaro pointed out earlier this morning, prices had risen as high as $99.11 this morning in reaction to lower temperatures, but that has all changed as traders have instead focused on news from over the weekend indicating that the thirteen nation oil cartel OPEC may be considering production increases next week.

The main cause for the rising belief in OPEC adjustments comes from a statement this weekend by Iranian Oil Minister Iranian Gholam Hossein Nozari, who stated that his country would be willing to consider lifting its quota. According to Nozari, "if statistics and data indicate there is a need to produce more oil, we have the capacity to increase the output and supply more oil for the market." However, he made it clear that he did not believe that the world was currently facing a shortage of the precious crude.

Currently, Iran is operating under a quota of 4.145 million barrels a day, but Nozari assures the market that the country could easily pump out upwards of 4.3 million barrels if the oil cartel feels this to be necessary.

Typically, as we get this close to an OPEC meeting while prices are trading high, the market will already have started to discount the chance of a production hike into the price of oil, but according to some analysts this is not the case this time around. Edward Meir, an analyst at MF Global UK Ltd., stated in a research note that "the markets have yet to discount the outcome of the OPEC meeting." Assuming that Meir is correct, and we do indeed see a production hike, then we could easily see prices move down towards the $90 level pretty quick.

While prices will almost certainly drop following any announced OPEC production hikes, it is worth noting that any changes that the cartel approves will not directly effect prices until early spring of next year. The reason for this is that any increase that gets voted on next week will in actuality result in production increases in January and since the United States gets oil 30 to 60 days after purchase, this increased oil production will not hit the American consumer until at least February and possibly even out to March.

For now it looks like oil is going to be in the middle of a tug of war between possible production hikes and the onslaught of winter weather which will lift oil demand for heating. It is also worth mentioning that the continued weakness in the US dollar will further apply upward pressure on oil prices.

We will get a much better idea of what we can expect out of OPEC later this week when we get the US Energy Department's weekly inventory report on Wednesday.

Prices have fallen over a dollar a barrel down to $97.09 in today's session.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.