The IEA, which has expressed concern for months that stocks of oil in OECD countries are relatively low at about 50 days of consumption, noted in its report on July 13 that extra production capacity was looking tight.

Referring to the new increased Opec official quota of 26 million barrels per day, the IEA noted that this merely aligned the quota with real production.

The agency's next monthly review of conditions on world energy markets, which will be studied closely regarding inventories and supply prospects, is to be published on Wednesday, August... The IEA, created after the first oil shock in the 1970s to help Organisation for Economic Cooperation and Development countries avert crises, said in its report three weeks ago the latest data suggested that Opec could sustain production at close to, or marginally above, June levels in July and into August.

Prices had eased in June owing to "ample" supplies of oil but the situation appeared to have switched back on concern about security of supply and production problems in Iraq, Nigeria, the North Sea and US Gulf of Mexico, and uncertainty in Russia.

"The potential for regime change, insurgents' activity and industrial action which, in varying combinations, could have an impact upon crude supplies from Iraq, Nigeria, Venezuela and perhaps Indonesia over the (northern hemisphere) summer are lending support once more to prices."

In a telling sentence, the IEA then observed: "In this context, high and actual Opec supplies shift the spotlight onto limited spare production capacity."

The agency assessed the Organisation of Petroleum Exporting Countries' spare capacity at "only 620,000 barrels per day based on June production" excluding Iraq, Nigeria, Indonesia and Venezuela owing to "a high degree of uncertainty" about problems affecting capacity.

This was an "exceptionally slim margin" particularly when output by some key Opec producers appeared to be "at risk of disruption".

-Nampa-AFP

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