Oil majors dragged the market lower as crude prices were dragged back towards $18 a barrel. BP fell 16p to 5121/2p while Shell Transport dropped 121/2p to 4691/2p and Enterprise Oil 17p to 460p. Continental European oil stocks were also lower.

The latest US inventory data were higher than forecast and healthy inventories combined with unseasonably mild weather have caused traders to be increasingly doubtful that OPEC's measures will be enough to outweigh flagging demand. The Energy Information Administration said on Thursday US oil demand had fallen for the first time in a decade.

The prospects of P&O were called into question yesterday as Dresdner Kleinwort Wasserstein downgraded the shipping company from a "hold" to a "sell" recommendation with a target price of 170p. The brokers said that an increase in shipping capacity was set to push the company into a loss cycle. Commerzbank, the house broker, upgraded shares from "hold" to "buy", saying that core activities offered "resilience" and that its outlook was one of "steady growth". Shares were down 31/4p to 249p at close.

Buoyant passenger figures posted by Easyjet fuelled a 2 per cent increase of 7p to 4951/2p in the discount airline's share price.

British Airways announced a fall in numbers earlier this week and its shares dropped a further 41/4p to 2233/4p.

Associated British Foods, whose brands include Twinings tea and Silver Spoon sugar, indicated that it was expecting to increase operating profit in the current financial year. Profit-taking in the notoriously illiquid stock forced the share price down 14p to 483p, negating the gains seen in the past two weeks.

US broker Morgan Stanley downgraded Six Continents, the hotel and restaurant group, from an "outperform" to a "neutral" stance as the stock hit its target price of 710p. Shares recovered later in the day and closed down 1/2p at 734p.

Abbey National fell 20p to 970p as UBS Warburg cut its stance to "hold" from "buy" after Abbey brought forward its pre-close statement and said its exposure to Enron was £115 million but it had provided for only £95 million.

Vodafone held relatively steady in a falling market as Goldman Sachs reiterated its bullish view on the mobile operator and raised earnings expectations slightly.