World oil prices fell sharply on profit-taking Friday after the International Energy Agency slashed its demand forecast and amid delays to a Greek bailout deal, analysts said.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in March, sank $1.09 to $98.75 a barrel.

Brent North Sea crude for March tumbled $1.33 to $117.26 in late morning London deals.

On Thursday, the Brent contract had struck $118.79 -- which was the highest level since August 1 -- propelled by ongoing tensions in key crude producer Iran and tentative hopes of a Greek debt deal.

"The market is overbought, so (it is) only natural that it is tanking," VTB Capital analyst Andrey Kryuchenkov told AFP.

"The dollar is up and (there are) little other developments, beside the IEA today which has sharply revised global demand growth for 2012."

The International Energy Agency (IEA) on Friday trimmed its forecast for oil demand growth because of gloomy economic prospects, but said markets were taking tougher international sanctions on Iran in their stride.

The IEA cut its forecast for growth in oil demand this year of 0.8 million barrels per day (mbpd) from 1.1 mbpd after the International Monetary Fund slashed its global economic growth estimate to 3.3 percent from 4.0 percent.

The Paris-based IEA was largely sanguine about the impact of tighter international sanctions on Iran, including an EU import ban which takes effect in July.

"Despite tougher new sanctions by the international community, the market is largely still taking the situation in its stride," said the IEA, which is the energy monitoring and policy forum of the OECD, in its monthly review.

The new forecast of global oil demand of 89.9 mbpd by the IEA, which represents industrialised consuming nations, is slightly higher that that of the OPEC oil producers cartel, which trimmed its 2012 demand forecast on Thursday to 88.76 mbpd.

Kryuchenkov added that the IEA "are just adjusting to the last global growth revision by the IMF amid the highly uncertain global GDP outlook for the year due to the eurozone debt crisis".

The crude oil market also retreated on Friday under pressure from ongoing uncertainty over Greek talks.

"Prices have dipped... on news that the Greek bailout deal is once again delayed," said Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore.

"There still isn't sufficient confidence in the eurozone that the austerity measures taken by Greece will hold up," he told AFP.

Eurozone finance ministers on Thursday postponed a decision on a new bailout to save Greece from bankruptcy, giving Athens less than a week to meet three new conditions in return for aid.

The demands include additional structural spending cuts of 325 million euros ($432 million) for 2012, a written pledge from coalition leaders that they would implement austerity measures and an endorsement of those measures by the Greek parliament.

Athens had reached a last-minute deal Thursday on new austerity measures demanded by international lenders in return for the 130-billion-euro ($172 billion) bailout it urgently needs to avoid defaulting on payments due to bond holders on March 20.

But after seeing Greece drag its feet on reforms for the past two years, eurozone finance ministers want proof that Athens will follow through on its promises this time.

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