Page last updated at 11:56 GMT, Thursday, 14 May 2009 12:56 UK

Oil falls as demand 'set to drop'

Oil well in Bahrain
Demand for oil will remain subdued this year, the IEA says

The price of oil has fallen after the International Energy Agency (IEA) said world oil demand would drop this year by more than at any time since 1981.

The price of US light crude oil fell by more than $1 a barrel to $56.86, while Brent crude dropped 74 cents to $56.60.

The IEA said demand for oil would fall by 3% this year compared with 2008.

On Wednesday, oil prices hit six-month highs, with US crude prices topping $60 on hopes that the worst may be over for the world economy.

"The oil price seems to have moved a bit higher in the past month largely on the basis of equity markets and sentiment rather than evidence of higher consumption," said David Fyfe, head of the IEA's Oil Industry and Markets Division.

The Paris-based IEA said demand would fall to 83.2 million barrels a day this year, 2.6 million less than in 2008.

The Organisation of Petroleum Exporting Countries (Opec) has implemented a number of production cuts in order to counter the fall in demand for oil and halt the slide in its price.

Oil prices hit a record of more than $147 a barrel in July last year.

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