NEW YORK - Oil prices fell below $92 a barrel on Friday on concerns that rising consumer prices could increase the headwinds facing the U.S. economy and lead to a slump in fuel demand.

U.S. crude for January delivery settled 98 cents lower at $91.27 a barrel. London Brent crude for January delivery settled up 55 cents at $92.67 a barrel, supported by short covering ahead of the contract's expiry.

U.S. consumer prices jumped a bigger-than-expected 0.8 percent in November, the sharpest climb in more than two years, driven by surging energy costs, the Labor Department said.

"(The) big jump of 0.8 percent means less discretionary income and is, therefore, bearish for the (energy) market," said Nauman Barakat, energy analyst and senior vice president at Macquarie Futures USA.

The report came amid signs U.S. oil demand growth is being clipped by the wider economic problems stemming from the global credit crunch, prompting producer group OPEC to dim its energy consumption outlook.

"Prospects for 2008 are increasingly clouded by the expected slowdown in the U.S. economy," the Organization of the Petroleum Exporting Countries said in its December Monthly Oil Market Report.

Oil has retreated from record highs near $100 a barrel last month as the market worried about the prospect of an economic downturn in the United States, the top oil consumer.

This week's concerted action by the U.S. Federal Reserve and other major central banks, aimed at restoring confidence to world credit markets, failed to erase those concerns.

The International Energy Agency, adviser to 27 industrial countries, was more upbeat than OPEC in its latest monthly snapshot of the oil market.

It predicted buoyant oil consumption in the Middle East would help fuel an increase of 2.1 million barrels per day in oil demand next year, up 200,000 bpd from its previous forecast.

"We are more pessimistic than the IEA on demand growth for 2008," said Mike Wittner, oil analyst at Societe Generale.

Adding downward pressure to oil prices Friday, the U.S. dollar rose to seven-week highs. Gains in the dollar put commodities under pressure as these have tended to trade inversely to the U.S. currency.

"The dollar has been very strong for the last two days and that is a major input," said Olivier Jakob of oil consultancy Petromatrix.

Limiting losses on the crude oil market Friday was a big winter storm due to hit the U.S. Northeast over the weekend, which would boost demand for heating fuel.