Oil fell for a second day after the International Energy Agency cut its 2009 forecast for world oil demand, projecting consumption will drop the most since 1981. The IEA, the Paris-based adviser to 28 nations, reduced its demand estimate to 83.2 million barrels a day this year, down 3 percent from 2008. That is 230,000 barrels a day lower than it forecast last month. The revision comes a day after OPEC reduced its 2009 forecast and said it increased supplies last month. “That’s the biggest drop since 1981, the year of the double-dip recession in the U.S.” said Peter Luxton, an energy analyst at Informa Global Markets. “There is a huge amount of uncertainty about when recovery will come and there is no evidence yet that it has started.” Crude oil for June delivery dropped as much as $1.42, or 2.5 percent, to $56.60 a barrel on the New York Mercantile Exchange, and traded at $56.97 at 10:19 a.m. in London. Yesterday, the contract fell 83 cents, or 1.4 percent, to settle at $58.02 a barrel, the biggest decline since April 27, after the Organization of Petroleum Exporting Countries said it increased production last month. Demand is weakest in the most developed nations, where consumption will drop by 5.1 percent this year, the IEA said. The IEA cited “very weak” consumption data in April for the U.S. Demand in developing economies is forecast to drop for the first time since 1994, according to the IEA, as China and Russia “continue to exhibit sustained weakness.” Very, Very Weak “Demand continues to look very, very weak,” David Fyfe, head of the IEA’s oil industry and markets division, said in a phone interview from Paris. “Although there has been a lot of talk about the green shoots of economic recovery, we think it is still a little bit early to be flagging any start of a full blown recovery.” Oil traded above $60 earlier this week for the first time in six months as stock markets rallied on increasing optimism about an economic recovery. Prices are up 28 percent this year. Brent crude oil for June settlement fell as much as $1.34, or 2.3 percent, to $56 a barrel on London’s ICE Futures Europe exchange. It was at $56.46 a barrel at 10:19 a.m. local time. Crude inventories in developed nations are at their highest since 1993. Stockpiles were equivalent to 62 days of consumption as of the first quarter of the year, according to the IEA. Earlier this week, Iran’s OPEC governor Mohammad Ali Khatibi said 52 days is a “healthy level.” “The stock build is massive,” said Luxton. “The optimism is not being supported by real economic data.” OPEC increased crude oil production last month for the first time since July as higher crude prices encourage members to backtrack on their production quotas. The 11 members bound by targets pumped 25.8 million barrels a day, compared with their official Jan. 1 limit of 24.845 million a day, the group said yesterday. That means the group collectively completed 77 percent of its promised reduction, compared with 82 percent in March. The IEA said today that members complied with 78 percent of the cuts.

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