In the absence of a big supply disruption that would expose the world's lack of spare supply capacity, an approaching wall of Saudi crude could be enough to drag prices lower just in time for November's U.S. election, they said.

"The Saudis are sounding determined to reassert their control on prices," said Rick Mueller of Boston-based consultants Energy Security Analysis.

"With Saudi output rising and demand growth in the U.S. and China easing, we expect oil prices to weaken from today's heady levels," said Adam Sieminski of Deutsche Bank in London.

Higher Saudi supplies over the last couple of months have failed to stem oil's rally, which is driven by robust demand growth and concern over disruption to tight international supplies.

Now Riyadh is prepared to pump even more.

The trouble is that much of the kingdom's extra supply is heavy crude - lower quality than refiners need to make light products such as gasoline that are in such strong demand.

In addition, oil companies are reluctant to hold extra inventory in a market that places a premium on physical crude deliveries against forward prices, a backwardated market.

"Companies, particularly in the competitive U.S. market, don't want to hold excess storage when the market is backwardated and that makes it difficult to build inventories," said Leo Drollas, chief economist at London's Centre for Global Energy Studies.

Saudi Arabia has pledged to provide all the crude its customers can take, in a renewed effort to take the steam out of a rally that seems destined to drive oil over $50 a barrel.

Industry sources have said Saudi Arabia is preparing to boost crude output close to 10 million barrels per day (bpd) in September from an average of 9.3 million bpd over the past three months.

FLUSHING OUT

The move aims in part to flush out speculators aiming to make a quick return out of rising oil prices who Riyadh sees as responsible in part for pushing prices far higher than the supply-demand balance merits.

Saudi Crown Prince Abdullah, the kingdom's de facto ruler, has said he prefers to see world oil prices between $25-$30 a barrel and said Riyadh will pump "as much as fields allow" to cool off overheated markets.

The kingdom's supply surge will help push up total OPEC output to the highest level since 1979. OPEC said in a report this week that it expects to production to reach 30.5 million bpd in September from about 29 million bpd in June.

So far the projected surge in Saudi supply has yet to a show up in chartering. OPEC's westbound crude oil exports have fallen through the second half of July and into August, brokers and shipping analysts have said.

Given the six-week transit time between the Middle East and the United States, it may not be until the latter part of September that the extra supplies start to hit the U.S. supply system in force.

That could coincide with a seasonal downturn in U.S. crude demand as refineries go into autumn maintenance, potentially taking the heat off prices as the political stakes rise ahead of the U.S. election.

NO LUCK SO FAR

While the surge in Saudi supply should swell global crude inventories to seemingly healthy levels, it is regional shortfalls in some sensitive refined product markets that may keep prices on the boil.

Traders will be focused on pre-winter heating oil inventories in two key areas - Germany, where consumers have been slow to stock up because of high prices, and the U.S Northeast, the world's biggest regional market for the fuel.

An early bout of cold weather in Europe this autumn could cause a heating oil price spike if consumers rush to fill storage tanks just as some of the region's largest refineries are shut for maintenance.

So far the main impact of rising supplies from Saudi Arabia and other OPEC members has been to leave buyers awash with bottom-of-the-barrel heavy grades, which are more complex to refine than prized light crudes rich in gasoline and distillates.

Earlier this month, state oil firm Saudi Aramco cut the prices of its Arab Heavy crude to the deepest discounts ever versus high-flying regional benchmarks like Brent and U.S. crude in an attempt to shift more barrels.

The September Saudi supply increase will push it closer to its 10.5 million bpd capacity limit, leaving even less of a buffer against the threat of supply disruptions that hang over major producers such as Iraq and Russia.

A major output interruption then would force consuming nations to give serious consideration to a release of strategic stocks - a prospect Saudi Arabia is eager to avoid.