World oil demand estimate raised

World oil demand stands at over 80 million barrels a day

The International Energy Agency has revised upwards its estimate of world oil demand, quashing hopes of an imminent decline in oil prices.

The IEA said in its monthly oil market report that demand for oil was running at 82.2 million barrels a day, 750,000 more than previously thought.

Demand growth this year is running at its fastest level in 24 years, the Paris-based organisation said.

Brent crude futures edged up nine cents to $41.37 as traders digested the news.

US light sweet crude futures, which briefly touched a 21-year record of $45.04 on Tuesday, rose 15 cents to $44.67.

Price pressure

Analysts attribute the surge in demand to a surge in consumption triggered by the US economic recovery and China's economic boom.

The IEA added that the effective spare capacity of oil producers' cartel Opec had narrowed to about 600,000 barrels a day in July, following recent efforts to keep pace with rising demand.

The IEA, set up thirty years ago to advise oil consuming nations, said world demand would rise by a further 1.8 million barrels next year to 84 million barrels a day.

It added that Opec's production capacity would rise by 400,000 barrels a day this year, and by a further 700,000 barrels a day in 2005.

"The market is tight, production and infrastructure capacity is less than desired, and uncertainties continue to weigh on the market," the agency said.

On a positive note, the IEA added that it did not expect Russian supplies to be disrupted, despite widespread concerns over the future of local oil giant Yukos, responsible for one fifth of the country's output.

Worries that Yukos could be forced to suspend production because of a tax dispute with the government have contributed to the recent surge in oil prices.

Last week, IEA chief economist Dr Fatih Birol told BBC News Online that economic growth would slow unless oil prices retreated from their current highs.