Oil falls on weak demand

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LONDON (Reuters) -- Oil fell more than 3% to below $57 a barrel Friday as dealers became increasingly pessimistic about the outlook for global energy demand, hard hit by the economic slump.

Losses on equities markets and moderate gains in the U.S. dollar against other currencies also encouraged selling in the commodities markets.

U.S. crude for June delivery fell $2.28 to settle at $56.34 a barrel, down from a six-month high of more than $60 hit earlier this week.

The losses came after three top global energy forecasters - the International Energy Agency, the Energy Information Administration, and OPEC - downgraded in recent days their forecasts for global energy demand in 2009.

World energy use has been shrinking under the weight of the global economic recession for the first time in a quarter century, and the IEA said the decline in oil consumption in 2009 would be the steepest since 1981.

Oil's losses were encouraged by weakness on Wall Street Friday as bank shares tumbled.

Oil prices have been tracking equities markets in recent months as traders look to stocks for signs of economic health that could affect world fuel demand.

The greenback was also up slightly against a basket of major currencies, having risen earlier following weak German economic data. A stronger dollar can limit investor demand for oil and other commodities.

OPEC, which has agreed to cut 4.2 million barrels per day of output since September, will meet later this month to revisit production policy. Iraq's oil minister said Thursday the group would likely leave output unchanged if prices remain relatively strong.

Renewed unrest in Nigeria, Africa's biggest oil producer, offered some support for prices.

Nigerian militants have hijacked two cargo ships in the Niger Delta and given oil companies until Saturday to evacuate staff, warning they would attack helicopters and planes after the deadline, after heavy clashes with the military.