Oil dropped to just above $56 a barrel yesterday after the latest evidence of a deep drop in demand offset news Opec might take emergency action to curb supplies.

US crude was seven cents lower at $56.09 by 1627 GMT, recovering from a session low of $54.67 - the weakest level since January 30, 2007.

London Brent crude dropped $1.12 to $51.25.

"The only thing supporting the market is the possibility of Opec cuts at the end of the month, but the production cuts would probably only be in step with falls in demand," said Christopher Bellew of Bache Financial. Selling gathered fresh momentum after the latest set of US inventory data showed another fall in US gasoline demand and a rise in stocks of refined products.

Overall crude stocks were unchanged against expectations of an increase.

But gasoline inventories rose by two million barrels, more than analyst expectations for a 300,000 barrel rise and gasoline demand over the previous four weeks was 1.9 per cent lower than a year ago.

The International Energy Agency in a monthly report slashed its global oil demand growth forecast for next year and said this year's increase in consumption had been the slowest since 1985.

It predicted demand would next year expand by only 350,000 barrels per day (bpd) - down 340,000 bpd from its forecast in last month's report.

Faced with the prospect stocks will swell as consumers stop buying, pushing prices even lower, the Organization of the Petroleum Exporting Countries said it was considering an emergency meeting at the end of November in Cairo.

Only last month, it agreed to cut output by 1.5 million bpd at emergency talks in Vienna.

Oil has lost more than 60 per cent of its value since hitting an all-time high above $147 a barrel in July.

The average price so far this year is still only just below $90 a barrel, but Opec is focused on the price it receives for its oil. The Opec basket on Wednesday dropped below $50 a barrel for the first time since January last year.