ERHC Energy Inc (ERHE)

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Oil prices drop to $88.85 on lower demand forecast

CRUDE oil prices fell on concern that economic growth may slide in the United States (U.S.), the world's biggest economy, reducing energy demand.

U.S. fuel consumption growth has declined as mortgage delinquencies, which reached a 20-year high in the third quarter, threaten to cut economic expansion. President George W. Bush and Treasury Secretary, Henry Paulson, on Thursday, announced an agreement with lenders that will fix rates on some home loans for five years.

``I wonder how bad this economy must look for the government to do what it's doing now,'' said Gordon Elliott, risk management specialist at FC Stone LLC in St. Louis Park, Minnesota. ``A slowdown or recession really cuts energy consumption.''

Crude oil for January delivery fell $1.38, or 1.5 per cent, to $88.85 a barrel at 9:13 a.m. on the New York Mercantile Exchange, the biggest decline this week. The price has fallen 7.8 per cent in the past month.

Oil prices may fall next week on speculation that a slowing economy will cause U.S. fuel demand to drop, bolstering inventories, a Bloomberg survey showed.

Twenty-eight of 46 analysts surveyed, or 61 per cent, forecast oil prices will decline through Dec. 14. Nine, or 20 per cent, said prices will rise and nine forecast little change. Last week, 48 per cent of respondents said oil would drop. U.S. fuel stockpiles rose and demand declined last week, according to an Energy Department report on Dec. 5.

Brent crude oil for January settlement fell $1.18, or 1.3 per cent, to $89 a barrel on the London-based ICE Futures Europe exchange.