Oil prices threaten recovery: agency

LONDON: Another spike in oil prices could derail the world's still-fragile economic recovery, says the International Energy Agency.

In its review of the oil market, the agency said: "The recent price spike, if further extended, risks derailing the recovery. Not only that, but oil demand itself would rebound much more slowly were the price rally sustained into 2010."

Oil, now around US$79 ($107) a barrel, has risen by about 75 per cent this year. The agency also said that indications of renewed economic growth remained tentative.

"If prices keep rebounding, there's a risk to the global economy as a whole, even to some of those economies in the Far East and even the Middle East," added David Fyfe, the head of the body's oil industry division.

A mixture of higher demand - especially from still-vibrant emerging economies such as China and India - and constricted supply is responsible for the latest upward pressure on prices.

The agency says that global demand is projected to improve next year to 86.2 million barrels a day, 500,000 barrels a day more than in last month's report.

That stands against an estimated average of 84.8 million barrels a day this year, which was in turn 1.7 per cent or 1.5 million barrels less than last year.

Growth in China is set to rise as a result of stimulus-related infrastructure spending. A modest forecast rise in demand for oil in the US is thought to be uncertain.

"It would seem that the 'real' US economy, as opposed to the financial one, is struggling to recover, despite the end of the recession," the agency said. Even so, the agency expects global oil demand to grow in the fourth quarter.

- INDEPENDENT