Oil rise 'could derail recovery'

Oil prices have surged nearly 80% this year

The International Energy Agency (IEA) has warned that the recent rise in the price of oil "risks derailing the recovery" if it continues.

The IEA says that oil demand itself will also rebound much more slowly if price rises continue in 2010.

The oil price has risen more than 70% this year and is trading at about $77 a barrel, after falling on Thursday.

The IEA also warned that signs of renewed economic growth around the world remained "tentative".

The price of oil fell $2.43 to $76.85 a barrel on Thursday after a bigger than expected rise in weekly US oil supplies.

'Risk'

In its monthly report, the agency said China was driving demand and revised upwards its forecasts. In 2010, it predicts a 1.6% increase in demand to 86.2 million barrels a day.

The IEA said that in the US, "the 'real' economy, as opposed to the financial one is struggling to recover" and added that if the government withdrew its stimulus spending measures, the economy could "choke again... and cast further gloom on an already depressed job market".

It added that economies in developed countries were still fragile, and that demand for oil in those nations was dropping away when prices hit $80 a barrel.

"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," said David Fyfe, the head of the IEA's oil industry division.

However, the IEA also said global oil demand would grow in the fourth quarter of this year, the first year-on-year increase in fuel use since the second quarter of 2008.

And it raised global oil demand forecasts for 2009 by 210,000 barrels to 84.8 million barrels a day.

Meanwhile, the IEA said that oil producing cartel OPEC pumped more oil in October than in September.