Paris, April 13: High oil prices could stall economic recovery in some top economies, the International Energy Agency warned on Tuesday when it upgraded its forecast for global oil demand this year.
Higher prices together with tighter credit conditions “could stall OECD economic recovery,” the IEA said referring to the 30 advanced economies covered by the Organisation for Economic Cooperation and Development.
The OECD, based in Paris, includes Britain, France, Germany, Japan and the United States, and the IEA is its oil monitoring branch.
In its monthly oil market analysis, the IEA reported concerns that oil markets could be “overheated” with the oil price at around 85 dollars a barrel.
The group said there were “questions over the sustainability of prices markedly higher” than the 70-80 dollar a barrel level.
“Ultimately, things might turn messy for producers if 80-100 dollars a barrel is merely seen as the new 60-80 dollar a barrel,” it added.
Oil prices fell in early trading in London after the IEA report was released, with New York’s main contract, light sweet crude for delivery in May, dropping 64 cents to 83.70 dollars a barrel.
Brent North Sea crude for May slid 40 cents to 84.37 dollars.
The IEA said oil demand would be 30,000 barrels per day higher and total 86.6 million barrels per day (mbd) this year owing to unexpectedly strong economic activity in the United States, Asia and the Middle East.
But it reported preliminary data showing that oil product demand in Europe shrank by 3.4 percent in February on a 12-month comparison.
The data cast doubt “on the sustainability of Europe’s petrochemical-led, manufacturing-based, export-oriented economic recovery,” it said.
“In addition, the thorny and unsettled issue regarding Greece’s potential rescue from default and eventual contagion to other southern European countries has introduced a further element of economic uncertainty,” it added.
The IEA also noted a boost to the global refining industry which has been in the doldrums for two years and raised its forecast for oil supply from countries such as Canada and Russia that do not belong to the OPEC oil cartel.
Non-OPEC output was revised up by 220,000 barrels per day to 52.0 mbd for 2010 “reaffirming a more optimistic supply outlook amid elevated price levels.”
The IEA said that global refining supplies rose in the first quarter of 2010 for the first time since 2008, indicating economic recovery.
It estimated refinery throughput at 72.5 mbd for the first quarter, 800,000 barrels a day higher than the first quarter of 2009.
This is the first annualised increase since the second quarter of 2008.
“While China, India and Russia all posted record highs in February, European throughputs fell to their lowest level in 17 years,” the IEA said.
The organisation said it expected global refinery throughput to rise to 72.9 mbd in the second quarter “as global oil product demand growth gathers pace.”
Chinese demand, including refinery output and net oil product imports, rose by 19.9 percent in February on a 12-month comparison, the IEA said.
Andrei Kryuchenkov, an analyst at Russian bank VTB Capital, said refineries were “dramatically increasing their crude throughput.”
Refineries are “returning from shutdowns and in anticipation of strong domestic fuel demand amid increasing industrial and farming activity,” he said.
—Agencies