UPDATE 7-Oil drops towards $86 on euro concerns, China talk

                                
 * Ireland worries hit shares, commodities
                                
 * China stocks fall on rate increase talk
                                
 * IEA trims 2011 oil demand growth estimate, raises 2010
                                
 
                                
 (Updates prices)
                                
 By Alex Lawler
                                
 LONDON, Nov 12 (Reuters) - Oil fell towards $86 a barrel on
Friday, slipping from a 25-month high reached in the previous
session, as concern about Irish debt and talk that China may
raise interest rates spurred a retreat from riskier assets.
                                
 Attention in the oil market refocused on risk aversion and
macroeconomic concerns at the end of a week when prices were
sent higher by Chinese demand at a record and U.S. inventories
plunging.
                                
 "This price slump can be explained by a general weakness of
commodity prices triggered by the stronger U.S. dollar and
rumours of an imminent interest rate hike in China," said
Carsten Fritsch, analyst at Commerzbank. 
                                
 "Consequently, we are likely to be seeing profit taking by
short-term oriented investors primarily."
                                
 U.S. crude <CLc1> was down $1.43 a barrel at $86.38 as of
1449 GMT, after touching an intra-day peak of $88.63 on
Thursday, the highest since October 2008. ICE Brent <LCOc1> slid
$1.24 to $87.57.
                                
 Some analysts said oil's rally had got ahead of itself based
on fundamentals of supply and demand.
                                
 "When you look at the fundamentals, although improving
during the week, they are not really supporting a very strong
increase in oil prices as we have had," said Christophe Barret
of Credit Agricole.
                                
 The euro bounced from six-week lows against the dollar on
Friday as EU leaders sought to reassure nervous bondholders and
on speculation, quickly denied, a rescue package for Ireland was
being hammered out.
                                
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 For a timeline on the eurozone crisis:
                                
 http://link.reuters.com/kar27p
                                
 Euro zone struggles with debt graphic:
                                
 http://r.reuters.com/hyb65p
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 European equities lost ground, gold fell and copper
declined. Asian stocks were broadly lower, led by a drop in the
Shanghai composite index <.SSEC> on talk of interest rate
increases.
                                
 The International Energy Agency, an adviser to 28
industrialised countries, on Friday predicted a slowdown in the
rate of growth in global oil demand next year, while raising its
forecast for 2010. [IEA/M]
                                
 Concerns about Ireland overshadowed a Group of 20 leaders'
summit in Seoul, where a breakthrough on resolving global
economic imbalances amid incongruent policies looked
unattainable. [ID:nN11196971]
                                
 Oil had rallied for most of the past two weeks, partly on a
plan by the U.S. Federal Reserve to buy $600 billion in Treasury
bonds to help speed economic growth.
 (Additional reporting by Alejandro Barbajosa; Editing by
Anthony Barker)