Crude Oil Drops as IEA Cuts Demand Forecast for a Fifth Month

June 10 (Bloomberg) -- Crude oil fell as the International Energy Agency cut its forecast for global oil demand for a fifth month because record prices are slowing consumption.
The IEA, the energy adviser to 27 nations, trimmed its prediction for 2008 demand by about 70,000 barrels a day to 86.77 million barrels, the Paris-based agency said today in its monthly report. The dollar rose to a three-month high versus the yen, potentially cutting demand for oil as a currency hedge.
``At $130 a barrel, we see a lot of airlines cutting back,'' said Helen Henton, head of commodity research at London- based bank Standard Chartered Plc. ``We are seeing a lot of countries in Asia having'' to stop fuel ``subsidies because they clearly can't afford prices at these levels.''
Crude oil for July delivery fell as much as 94 cents, or 0.7 percent, to $133.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $133.81 a barrel at 10:10 a.m. London time.
Futures reached a record $139.12 on June 6 and have more than doubled in the past year.
Malaysia and India last week relaxed fuel price controls joining Indonesia, Taiwan, Pakistan and Sri Lanka in boosting costs for business and consumers. The nations subsidized fuel prices to curb inflation expansion.
Higher oil prices are leading to slower growth in demand for fuels. Airlines including Qantas Airways Ltd., China Airlines and EVA Airways Corp. cut flights to cope with jet-fuel costs that have doubled in a year.
`Price Response'
``This is mainly as a response to the high prices,'' said Fatih Birol, chief economist of the IEA. Fuel demand will drop when Asian nations ``phase out those subsidies,'' because ``the bulk of the growth in demand is coming from'' China, the Middle East and India.
Saudi Arabian Oil Minister Ali al-Naimi yesterday called for a meeting of producers and consumers to discuss what he described as ``unjustified'' prices.
Brent crude oil for July settlement dropped as much as $1.23, or 0.9 percent, to $132.68 a barrel on the Intercontinental Exchange. The contact traded at $133.55 a barrel at 10:13 a.m. in London.
The dollar rose to a three-month high against the yen and gained for a second day against the euro after Federal Reserve Chairman Ben S. Bernanke said risks to the U.S. economy have diminished, prompting traders to increase bets on higher interest rates.
The U.S. currency's 5.9 percent slide versus the euro this year has boosted demand for oil as investors buy dollar-priced commodities as a hedge against quickening inflation.