Aug. 11 (Bloomberg) -- Crude oil dropped from a record $65.30 a barrel after the International Energy Agency for a fourth month reduced its forecast for growth in demand from China, the second- largest oil consumer.

China's consumption this year will average 6.75 million barrels a day, down from the 6.79 million a day estimated last month, the Paris-based agency said. The nation's oil demand in June already was down 1.3 percent from a year earlier. Increased electricity supplies from coal and hydropower are limiting a need to import fuel oil, the IEA said today.

``Even if demand keeps rising in China, it's not as much as anticipated,'' said Anette Einarsen, an oil analyst at Nordea Bank AB in Oslo.

Crude oil for September delivery fell as much as 48 cents, or 0.7 percent, to $64.42 a barrel on the New York Mercantile Exchange. It was trading at $64.52 at 12:13 a.m. London time, having almost doubled from the end of 2003.

In London, September Brent crude oil was down 22 cents at $63.77 on the International Petroleum Exchange. Prices are up 54 percent in the past year.

The IEA now projects China's oil demand will grow 4.9 percent in 2005, compared with an estimate in April for a 7.9 percent increase. Last year's oil demand in China surged 14 percent.

Increasing sales in the U.S. and China, the world's largest oil consumers, have forced producers including the Organization of Petroleum Exporting Countries to pump almost as much oil as they can, leaving little spare production to compensate for any disruptions to supply.

China's Growth

Demand in China is rising as more people fly more, buy cars and install air-conditioners to keep cool. The economy expanded 9.5 percent in the first half.

U.S. refineries are also straining to meet demand for fuels as high retail gasoline prices fail to slow consumption.

The IEA said world consumption this year will increase 2 percent, or 1.6 million barrels a day. High prices ``haven't completely choked off oil demand growth,'' the report said.

OPEC, source of more than a third of the world's oil, is pumping almost as much as it can to boost inventories and meet an expected surge in demand in the fourth quarter.

The IEA lowered its 2005 non-OPEC supply forecast by about 200,000 barrels a day, prompted by unscheduled shutdowns in the U.S. Gulf of Mexico, Norway and U.K., and the 2006 estimate by 400,000 barrels a day. Russian output will be lower than expected, the IEA said.

Oil prices rose in 1974 after an oil embargo that followed the Arab-Israeli war and from 1979 through 1981 after Iran cut oil exports. The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department, or $75.44 in today's dollars.

To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net

Last Updated: August 11, 2005 07:31 EDT