The West's energy watchdog urged oil producers to boost supply to protect economic recovery, just weeks before an Opec meeting which analysts say looks increasingly unlikely to increase production.
"The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply," the International Energy Agency said in a statement on Thursday during a two-day governing board meeting.
Analysts said it was an unusual move for The Organisation for Economic Co-operation and Development's energy arm. The Paris-based IEA has a policy not to comment on oil producers' policies. "It is quite rare that the IEA goes out directly to give suggestions to Opec," said Christin Tuxen, Danske Markets.
"It suggests the IEA is worried that we haven't seen Opec increasing supply... Libyan production has basically come to a halt and Saudi Arabia has been very slow to increase supply," she added. As global demand for oil increases seasonally from May to August, IEA members said there was a clear and urgent need for additional supplies to be made to refiners.
The IEA added it stood ready to work with producers as well as consumer countries, which are not members. "In this constructive spirit, we are prepared to consider using all tools that are at the disposal of IEA member countries," it said. Oil prices have rallied strongly since the beginning of the year on the unrest in North Africa and the Middle East, reaching near $130 per barrel. But they corrected sharply in early May to below $110 due to worries that high prices are destroying demand around the world. However many analysts, including from big banks like Goldman Sachs, BarCap and Deutsche Bank, said they expected prices to return or exceed recent highs at the end of 2011 due to tightening supplies.
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