UPDATE 2-Neste Q1 drops below forecast, demand seen weak

* Q1 underlying EBIT 56 mln crowns vs f'cast 91 mln

* Refining margin $9.44 vs avg fcast of $9.57 in poll

* Sees weak demand for 2009

(Adds detail on shutdown, quotes; updates share price)

HELSINKI, April 28 (Reuters) - Finnish refiner Neste Oil (NES1V.HE) reported a steeper-than-forecast drop in underlying first-quarter operating profit on Tuesday due to poor demand and said weakness continued to hurt its results in 2009.

The company also said it stopped production line 4 at its Porvoo refinery in mid-April for a planned two-month maintenance and upgrade shutdown meant to boost its productivity.

Underlying earnings before interest and tax (EBIT) dropped to 56 million euros ($72.9 million) in January through March from 119 million in the same quarter last year.

The result was poorer than an average expectation of a fall to 91 million euros in a Reuters poll of 10 analysts, whose estimates ranged from 66 million euros to 128 million. [nLM354436]

"The economic recession is now clearly being reflected in lower demand for petroleum products," Chief Executive Matti Lievonen said in a statement.

"Oil refiners feel the impact of this clearly because the market downturn is amplified by new capacity due to come on stream this year and next year," Lievonen said.

The company said the biggest drop occurred in the diesel market, which is related to industrial activity and transport.

"This was especially true in March, which was a difficult month, and the market situation has not improved during April," Lievonen said.

The refining margin, which is a key factor of profitability, fell to $9.44 per barrel in the first quarter from $11.91 in the same period last year, missing analysts' average estimate of $9.57 in the Reuters poll.

"Refining margins weakened on the back of the worsening global economy and falling product demand," Neste Oil said. "Gasoline margins recovered from the lows seen in late 2008, due mainly to reduced production, as well as relatively stable demand thanks to lower consumer prices."

Neste Oil refined 3.7 million tonnes of crude oil and feedstocks in the first quarter, down from 3.8 million a year earlier, it said. The Porvoo refinery refined 3.1 million tonnes and the Naantali refinery 0.6 million.

Neste Oil cut its 2009 investment plan to 890 million euros from an estimate of 950 million given in February. It said strategic investments would account for about 690 million of the total and maintenance and productivity investments 200 million.

Neste Oil shares fell 5.4 percent to 9.72 euros by 1515 GMT, underperforming a 1.7 percent drop in the Helsinki bourse general index . (Reporting by John Acher; Editing by David Cowell)