Oil futures, meanwhile, rose as traders anticipated the Federal Reserve will cut interest rates Tuesday afternoon. News that several crude oil pipelines in the Midwest were shut down due to ice storm also boosted crude prices.

At the pump, gas prices fell 0.8 cent overnight to a national average of $2.995 a gallon, according to AAA and the Oil Price Information Service. Gas prices have fallen nearly 12 cents since peaking at $3.112 a gallon in mid-November as oil approached $100 a barrel.

"Gas prices at the pump are likely to continue to decline over the next several weeks," said Fred Rozell, retail pricing director at the Oil Price Information Service.

However, Rozell doubts prices will decline as much this winter as they did last year. A year ago, gas cost $2.292 a gallon. That means gas prices will be starting from a much higher level when they begin their seasonal spring increase in advance of summer driving season.

"Unfortunately we will not get close to the numbers we saw last year and the spring will see another run up as it has the past 5 years," Rozell said.

The Energy Information Administration on Tuesday predicted gas prices will average more than $3 a gallon next year, and will peak at over $3.40 a gallon in the spring.

Some analysts doubt gas prices will fall much more as long as oil remains near $90 a barrel.

"I think they may be near the bottom at these prices because I think they never captured the $98, $99 crude prices," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.

Light, sweet crude for January delivery rose $1.81 to $89.67 a barrel. Crude prices have fallen in recent weeks but remain high by historical standards. A year ago, Nymex crude closed at $61.22 a barrel.

Crude prices were supported by expectations that the Fed will cut interest rates, a move that would likely help the U.S. economy -- the world's top oil consumer -- and bolster demand for crude.

However, the size of the Fed's cut could affect oil prices. A half-point cut is seen as supportive of higher prices, but "if it's a quarter-point cut, (prices) are more likely to go down," Lynch said.

Energy futures prices also rose on pipeline outages due to ice storms in the Midwest. An EIA report predicting "world oil demand will grow much faster than oil supply" offered traders mixed news. The report lowered global oil demand predictions for next year, but forecast oil prices will average nearly $85 a barrel in 2008 and that heating oil prices will rise 30 percent this winter compared to last.

Other energy futures also rose Tuesday. Heating oil futures rose 3.66 cents to $2.514 a gallon on the Nymex while gasoline futures rose 3.7 cents to $2.2871 a gallon. Natural gas futures added 3.6 cent to $7.068 per 1,000 cubic feet.

In London, Brent crude futures rose $1.43 to $89.47 a barrel on the ICE Futures exchange.

Energy traders were also anticipating Wednesday's inventory report from the EIA, which is expected to show an increase in crude supplies.

Associated Press writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.

http://www.eia.doe.gov/emeu/steo/pub/contents.html