By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- U.K. stocks dropped Thursday, with oil and gas shares leading decliners after oil prices were dragged to fresh multiyear lows.

The FTSE 100 fell 0.8% to 6,771.53, with the oil and gas group losing more than 3%. U.S. oil futures (CLH5) sat at their worst level since March 2009, with a sharp drop in prices triggered Wednesday after a larger-than-expected increase in U.S. crude supplies. Brent crude-oil prices were slightly lower Thursday after losing 2.3% in the previous session.

Shares of oil major Royal Dutch Shell PLC (RDSB) were at the bottom of the FTSE 100 as they dropped 4.2%. Shell was able to post a rise in fourth-quarter profit on a current cost-of-supplies basis -- a metric similar to the net profit reported by U.S. oil companies -- in the face of falling oil prices. That profit rose to $4.2 billion, compared with $2.2 billion in the same period last year. But Shell also plans to reduce capital expenditure by about $15 billion over the next three years.

Also near the bottom of the Footsie, shares of oil producer BP PLC (BP) fell 3.1%, BG Group PLC lost 2.5%, and Tullow Oil PLC pulled back 1.9%.

Meanwhile, Diageo PLC shares were off 0.6% after the world's largest liquor company said first-half profit fell 18%, with sales in North America dropping. Diageo's brands include Smirnoff, Guinness and Johnnie Walker.

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