Updated from 11:36 a.m. EDT

Oil prices eased back from their 10-year highs Friday on growing indications that the

Organization of Petroleum Exporting Countries

will boost production more than initially expected at its Sunday meeting.

The benchmark October contract for crude oil on the

New York Mercantile Exchange

ended the day down $1.76, or 5%, at $33.63 a barrel. In London, Brent crude oil closed down $1.77 at $32.78.

The round of profit-taking followed reports that Saudi Arabia, the world's largest oil exporter, will push for a 700,000-barrel-per-day increase above its current production, which is estimated to be between 8.6 million to 8.85 million barrels a day now -- at least 350,000 barrels a day above its current quota.

Still, it remains unclear whether such an increase would be enough to boost U.S. inventories to normal levels and bring prices down to OPEC's stated $25-per-barrel target.

Analysts at London-based

GNI

noted that Saudi Arabia has said that its daily output would rise to around 9 million barrels if the increase is supported at the meeting. That means that even with the additional boost in production the net increase could be 200,000 more barrels a day or even less, due to capacity constraints among other OPEC members.

Saudi Arabia, Kuwait and the United Arab Emirates are believed to be the only members of OPEC capable of implementing any substantial increases in production, as the rest of the oil cartel is already producing at or near capacity.

Phil Flynn, analyst at

Alaron Trading

, said the Saudis' proposed increase would be huge if the Saudis are actually pumping 600,000 additional barrels per day already, as they have indicated. But few believe the Arab country is producing that much oil now. According to U.S. government and industry figures, the production increase appears to be closer to 350,000 barrels per day.

Confusion over the official, vs. the actual, production increase figures could explain the muted reaction in the market on Thursday following reports that Saudi Arabia would push for more than the half-million-barrel-per-day increase agreed to under the price band mechanism set up by OPEC this summer.

Under the informal mechanism implemented at their June meeting, OPEC ministers agreed to raise production by 500,000 barrels a day if the price of oil in its "basket" (which includes blends from Algeria, Indonesia, Saudi Arabia and Venezuela) stayed above $28 a barrel for 20 consecutive business days. If prices remain above $28 on Friday, as expected, it would be the 20th day in a row, leaving little doubt that OPEC will approve at least a half-million-barrel-per-day increase Sunday.

Even if OPEC members approve a production increase of 800,000 barrels per day, some analysts say that it may be too little, too late to bring oil inventories and prices back to normal levels ahead of the winter season.

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The cost of crude oil is also affected by the speed with which U.S. crude oil and distillate inventories can be increased, and maintenance work can be completed on domestic refineries. Industry analysts say a sustained and substantial increase in inventories is imperative to bring prices back in the range of the low to mid $20s a barrel. Despite two weeks of a build-up in domestic

stocks, inventories are still far below last year's levels.

Just a month ago, oil inventories were at 24-year lows.

"We are woefully unprepared. We're practically defenseless," said Tim Evans, senior energy analyst at

IFR-Pegasus

. "The seasonal growth in demand over the next few months is going to soak up this extra oil that's likely to flow onto the market. That leaves us without an inventory cushion, and vulnerable to any supply disruption anywhere."

Most oil analysts agree that OPEC is unlikely to boost its official quota by more than 800,000 barrels a day at its meeting Sunday in Vienna. They describe Friday's downturn as a "technical correction" ahead of the OPEC meeting, rather than a sign that prices are finally easing.

Even with the slight drop Friday, oil prices remained nearly $10 a barrel higher than the target price of $25 supported publicly by OPEC members and the

Clinton

administration.

"The damage here was not really severe enough to reverse the sense of an intermediate-term uptrend," Evans said. "It's still premature to declare that a price top is in place."

That means consumers are likely to notice higher prices in a number of places this fall -- from the gas pump, to heating bills, to airline tickets. On Friday, three of the country's top carriers announced they have added a $20 fuel surcharge to every roundtrip ticket to offset the effects of surging oil prices.

The surcharges are in addition to those imposed in January, and affect flights on

Continental Airlines

,

American Airlines

and

Delta Airlines

-- the second- and third-largest carriers respectively. Fuel is the second-highest cost to airlines behind labor.