OIL prices are overheated following crude’s recent run to 18-month highs, according to the International Energy Agency (IEA).
Oil hit $87 a barrel last week – the dearest since October 2008 – but the IEA said crude costs had run ahead of a fragile economic recovery.
While some recovery in demand has supported prices at about $70-$80 a barrel, the IEA raised questions over the sustainability of prices markedly higher than those levels.
Motorists have felt the pain of the recent oil surge which – together with duty increases and a weak pound – have pushed the average UK pump price to a fresh high.
The IEA’s warning also raises the spectre of another market-driven bubble which helped to push crude to a record $147 a barrel in 2008, saying “recent exuberance . . . may have played a role”.
The spike could also choke off recovery in the developed economies, it added, with a manufacturing-led, export-based recovery in Europe appearing to be ebbing.
The IEA has left its estimates for Organisation for Economic Co-operation and Development (OECD) countries’ oil demand unchanged in 2010 as stronger demand in North America and the Pacific region offsets “inordinately weak” European data, adding: “Although industrial production has risen in France, Germany and the UK, it remains well below pre-recession levels, while in Italy and Spain it has barely increased from its recessionary depths.
“Greece’s continued fiscal predicament has introduced a further element of economic uncertainty.”
Meanwhile, the energy adviser lifted its forecasts for non-OECD states to account for higher-than-expected demand from Asian economies.
Although refining in Europe fell to 17-year lows in February, there was a first year-on-year increase globally since the start of the recession, driven by China, India and Russia.
The IEA added: “It is worth noting that six large non-OECD countries – China, Saudi Arabia, Russia, Brazil, Iran and India – are expected to account for almost three-quarters of global oil demand growth in 2010.”
Oil prices fell for a fifth consecutive session yesterday as a forecast increase in US crude stockpiles highlighted rising supplies and weak demand in the world’s largest energy consumer. Crude oil for May delivery fell 20 cents at $84.14 a barrel in New York, while Brent crude in London was nine cents cheaper at $84.86.