Crude oil fell for a second day after the International Energy Agency forecast that world oil consumption this year will fall the most since 1981. The IEA cut its estimate to 83.2 million barrels a day this year, down 3 percent from 2008. That’s 230,000 barrels a day lower than last month’s forecast. OPEC and the U.S. Energy Department lowered their 2009 outlooks this week. Oil also dropped after a bigger-than-expected gain in U.S. jobless claims tempered speculation that the worst of the recession is over. “The fundamentals of the oil market stink,” said Chip Hodge, who oversees a $9 billion natural-resource-company bond portfolio as managing director at MFC Global Investment Management in Boston. “The reality of the recent numbers is sinking in. Demand is weak, we have plenty of oil and there’s a great deal of spare capacity.” Crude oil for June delivery fell 84 cents, or 1.5 percent, to $57.18 a barrel at 10:55 a.m. on the New York Mercantile Exchange. Futures declined as much as $1.47, or 2.5 percent, to $56.55. Demand is lowest in the most developed nations, where oil use will drop by 5.1 percent this year, the IEA said, citing “very weak” U.S. consumption in April. Use in developing economies is forecast to fall for the first time since 1994 as China and Russia exhibit “sustained” weakness. “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.” $60 Oil Oil traded above $60 earlier this week for the first time in six months as stock markets rallied on optimism the economy may be picking up. Prices are up 28 percent this year. “You would think given these fundamentals that prices would be in the $40s,” Hodge said. “The market certainly did get ahead of itself and I don’t see any reason for it to go back and test $60 anytime soon.” The 11 members of the Organization of Petroleum Exporting Countries bound by production targets implemented 77 percent of planned cuts of 4.2 million barrels a day in April, down from a revised 82 percent for March, a monthly report from the group showed yesterday. “The slide in demand may be coming to an end, but it isn’t reversing,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. “If OPEC doesn’t better adhere to the quotas, they won’t be able to whittle away surplus inventories.” OPEC Production Those 11 nations, which exclude Iraq, pumped 25.812 million barrels a day last month, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. The nations have a target of 24.845 million barrels a day that took effect from Jan. 1. Total OPEC production rose 60,000 barrels to 28.48 million in April, the Energy Department’s Energy Information Administration reported on May 12. “Both OPEC and EIA reports this week showed an increase in OPEC production in April compared to March, so we’re seeing less compliance from OPEC and a continued decline in demand,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “That’s bearish for the oil market the next couple of weeks.” OPEC will meet May 28 in Vienna to review production quotas. It agreed in March to keep supply unchanged as members implemented the reductions agreed to last year. “The Saudis will probably look hard across the table at this month’s meeting and demand other members do a better job implementing the quotas,” Emerson said. “There probably won’t be another cut. Instead the members will reassert their desire to adhere to the 4.2 million-barrel cut.” Brent crude oil for June settlement fell 46 cents, or 0.8 percent, to $56.88 a barrel on London’s ICE Futures Europe exchange.

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