London: Sky-high oil prices are beginning to dent oil demand growth, the International Energy Agency (IEA) said on Tuesday adding prices could ultimately moderate through a global economic slowdown.
“Most analysts see a more formal OPEC policy response as unlikely... That leaves a less palatable route to price moderation -- namely economic slow-down and weaker demand growth,” the agency said in its monthly report.
“There are real risks however that a sustained, $100 per barrel plus price environment will prove incompatible with the currently expected pace of economic recovery,” it added.
The agency said preliminary data for January and February suggested that high oil prices may have started to dent demand growth. It, however, kept its 2011 global oil demand growth forecast unchanged at 1.4 million barrels per day or 1.6%.
The IEA said tight global supply was its another major concern as the global oil output fell by around 0.7 million barrels per day in March to 88.27 million bpd due to civil war in Libya. OPEC crude supply fell by 0.88 million bpd alone.
“Hypothetically, if global supply were to chug along at March levels for the rest of 2011, OECD inventory could slip to near five-year lows by December,” it said.
However, the IEA said it believed OPEC spare capacity stood at a comfortable level of 3.91 million bpd, with Saudi Arabia accounting for 3.2 million alone.