Rising Opec production and comfortable oil stocks in developed nations should limit a further oil price spike despite demand hitting an all-time high later this year, the West's energy watchdog said on Thursday.
The International Energy Agency, which advises 28 industrialised countries on energy policy, said in its monthly oil market report Opec's output rose by 280,000 barrels per day (bpd) to a two-year high of 29.85 million bpd in January from December mainly thanks to higher Iraqi output.
The Organisation of the Petroleum Exporting Countries led by Saudi Arabia has spare production capacity of 4-6 million bpd and is the only source of incremental oil for the world should demand exceed expectations again this year after robust 2010. "We are seeing a little more oil from Opec as they're seeing the same indicators on the demand side, especially in Asia, that we are. A flexible attitude from Opec is a good thing," said David Fyfe, head of the IEA's oil industry and markets division, in an interview with Reuters Insider television. To see the interview http://link.reuters.com/pys87r
"The fact that prices have gone up from around $75 in September to $95 a barrel and above is because of a sharp tightening in the physical market," he said. The IEA said it raised slightly its 2011 oil demand growth forecast by 50,000 bpd to 1.46 million bpd.
Although growth would be nearly half of the unexpectedly strong jump in demand by 2.84 million bpd in 2010, the world oil demand will surpass 90 million bpd in late 2011 for the first time, the IEA said. It said OECD oil stocks fell to a two-year low equal to 57.5 days of demand in December from 58.3 days in November but were still comfortable.
"A cushion of stocks and spare capacity does provide some potential to constrain further price increases in 2011," it said. The IEA was founded in 1973-1974 as a counterweight to Opec after the Arab oil embargo, which sent prices soaring.
Tensions between oil exporter group Opec and the agency have risen in the past months as Western countries are getting worried that high oil prices may spur inflation and therefore force them to raise interests rates, thus damaging a fragile economic recovery. Last month, the IEA said Opec leader Saudi Arabia had stealthily boosted output to cool an oil price rally.
Opec's Secretary General Abdullah al-Badri told Reuters Saudi Arabia had told Opec it had not opened its taps. It raised the call on Opec crude and stocks for 2011 by 100,000 bpd to 29.9 million bpd, saying the figure was close to Opec's January output levels.
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