(Adds comment, closing figures and details) * Canadian dollar at C$1.1572 or 86.42 U.S. cents * Bond prices higher across the maturity curve By Solarina Ho TORONTO, Dec 12 (Reuters) - The Canadian dollar closed at its weakest level against the greenback in 5-1/2 years on Friday as new worries over a drop in oil demand spurred by an International Energy Agency report sent crude prices plunging. The agency, which coordinates the energy policies of industrialized countries, forecast an increase in global supplies next year but cut its outlook for global oil demand by 230,000 barrels per day. U.S. crude prices have been nearly halved in the past six months, and they fell more than 3 percent on Friday as the market continued to hunt for an elusive bottom. Canada is a major oil exporter and the currency's sensitivity to crude prices has increased as oil prices have plunged. The country's main stock index, home to a hefty number of oil and gas producers, has dived more than 5 percent this week, while the index's energy subgroup has plummeted 13.4 percent. "Really, the story and the catalyst for the Canadian dollar is that the loonie is just covered in oil. It's pretty much a blood bath," said Rahim Madhavji, president at KnightsbridgeFX.com. "It seems like there is no end in sight in the short term." The Canadian dollar ended the session at C$1.1572 to the greenback, or 86.42 U.S. cents, its weakest close since July 10, 2009. It touched C$1.1591, or 86.27 U.S. cents, earlier in the session. It had finished at C$1.1527, or 86.75 U.S. cents, on Thursday. The currency has retreated 1.2 percent since last Friday. "We haven't been at these levels in over five years, so it starts to make the whole numbers pretty important, like C$1.16, C$1.17," said Camilla Sutton, chief currency strategist at Scotiabank. Next week, Canada will release a slew of top-tier economic data, including manufacturing sales, wholesale trade, retail sales for October, and November inflation figures. The U.S. Federal Reserve will also meet to make its next policy decision. "So we'll have a really good update on how the economic outlook is unfolding," Sutton said. Canadian government bond prices were higher across the maturity curve, with the two-year rising 10 Canadian cents to yield 0.969 percent, and the benchmark 10-year jumping 59 Canadian cents to yield 1.7961 percent. (Reporting by Solarina Ho; Editing by Peter Galloway)