Crude Oil Falls Below $90 on Concern Economic Growth Will Slow

Nov. 30 -- Crude Oil fell below $90 a barrel for the first time in a month on concern U.S. economic growth will slow, reducing energy demand.

Consumer spending in the U.S., the world's biggest oil user, rose less than forecast in October and incomes increased at the slowest pace in six months, the Commerce Department said in Washington today. Oil is heading for its biggest one-week drop in two years. Prices climbed to a record $99.29 a barrel on Nov. 21.

``The market is simply becoming more concerned about a possible recession that could reduce petroleum demand,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``We have been seeing evidence for some time of a weakening economy and weakening oil demand.''

Crude oil for January delivery fell $1.49, or 1.6 percent, to $89.52 a barrel at 10:00 a.m. on the New York Mercantile Exchange. Futures touched $88.52 a barrel, the lowest since Oct. 25. Oil has dropped 8.8 percent this week and is poised for its biggest weekly loss since April 2005.

Average U.S. consumption of oil products, such as gasoline and diesel, over the four weeks ended last week was 0.5 percent lower than a year ago, according to U.S. Energy Department data.

Oil surged above $95 a barrel yesterday after an Enbridge Inc. crude oil pipeline in Minnesota exploded on Nov. 28. Enbridge said operations will return to normal within three days.

Lower Prices

The pipeline blast seems to be ``just a near-term support,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis. ``As the details and extent of the damage and timeline for recovery came to light, it ended up pushing prices lower.''

The Enbridge pipeline blast killed two workers and cut shipments that average 1.5 million barrels a day. The pipelines transport oil to U.S. refiners, including BP Plc's plant in Whiting, Indiana, and facilities along the Gulf Coast. The U.S. imported 10.3 million barrels a day last week.

Brent crude oil for January settlement fell $1.38, or 1.5 percent, to $88.84 a barrel, the lowest since Oct. 31, on the ICE Futures Europe exchange in London.

Thirteen of 27 analysts surveyed by Bloomberg News, or 48 percent, said oil will drop through Dec. 7. Nine, or 33 percent, said prices will rise and five forecast little change. Last week, 43 percent of respondents said oil would fall.

OPEC raised shipments 2 percent to 24.53 million barrels a day in the four weeks to Dec. 15, according to consulting company Oil Movements.

Saudi Arabia, OPEC's biggest producer, is adding 500,000 barrels of spare capacity in December to ensure that consumers are adequately supplied, Oil Minister Ali al-Naimi said in Singapore on Nov. 28. The country is producing 9 million barrels a day, al-Naimi said.

``They will probably give us a token production increase and, by that time, it will be well discounted,'' Ritterbusch said.