Oil falls below $114 on global demand worries

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(Reuters)

NEW YORK (Reuters) - Oil prices fell below $114 a barrel on Friday on growing concerns about demand in industrial nations and the stronger dollar.

U.S. crude settled down $1.24 at $113.77 a barrel, after dipping to $111.34, the lowest level since May 2. London Brent lost $1.13 to settle at $112.55 a barrel.

Crude has fallen sharply since reaching an all-time high of $147.27 a barrel on July 11 as growing global economic problems and high fuel prices have cut demand in top consumer the United States as well as Europe.

"We might get to $110. How quickly we get there would depend on the demand outlook," said Simon Wardell, an oil analyst at Global Insight. "If next week's U.S. inventory data shows an increase in stocks, we could go lower."

The Organization of Petroleum Exporting Countries cut its 2008 demand forecast on Friday and added that ample supplies were paving the way to building inventories.

Output by the producer group rose 145,000 barrels per day in July to 32.8 million bpd, the International Energy Agency said this week.

A Reuters poll of analysts, banks and industry groups shows demand growth should rise next year, however, as demand from emerging economies like China outpaces losses from industrial nations.

The euro hit a six-month low against the dollar on Friday following further proof that the U.S. economic slowdown is spreading.

The economy of the 15-nation euro zone contracted 0.2 percent in the second quarter, data showed on Thursday.

Surging demand in China, India and other emerging economies sent commodities on a six-year rally that sent oil prices up seven-fold at their peak. Earlier this year, a rush of cash from investors seeking to hedge against inflation and the weak dollar also pushed up crude prices.

Oil traders were also eyeing fighting between Russia and Georgia, a key supply route from the Caspian to Europe.

The United States demanded on Friday that Russian troops end their occupation of Georgia immediately after Georgia signed a cease-fire agreement.

(Reporting by Matthew Robinson, Gene Ramos and Robert Gibbons in New York and Golnar Motevalli in London; Editing by Walter Bagley)