IEA chief warns of tighter oil market in 2011

London (Platts)--17Jan2011/721 am EST/1221 GMT

International Energy Agency chief Nobuo Tanaka warned on Monday of tighter oil supply over the next year, thanks to a more robust global economic recovery and declining oil inventories in the industrialized world.

"The economic recovery is becoming robust," Tanaka said in Abu Dhabi where he was attending the World Future Energy Summit. "OECD stocks have declined, so the market could be tighter next year."

"We could see a tighter market," he reiterated.

Tanaka described as "alarming" the recent rise in oil prices that last week took North Sea Brent crude futures as high as $99.20/barrel, and likened current market conditions to 2008 when oil prices spiked to record highs of more than $147/b.

"We are seeing signs of moving in that direction," he said.

Tanaka said that if oil prices continued to rise to the extent that they began to hurt economic recovery, producers should consider taking some action, though he stopped short of urging OPEC to increase production, calling instead for "more flexibility" from the oil producer club.

"We say that they have to be more flexible in their actions, and if there is a chance of a negative impact on the economic recovery, they have to properly decide," he said.

The IEA, he said, stands ready to release oil from its strategic stockpiles if such action becomes necessary.

"We have a strategic stockpile and we are ready to move," he said.

Tanaka was asked whether further oil price spikes were likely if OPEC did not act quickly.

"No," he said. "The spike may occur when a disruption occurs, like a strike somewhere and some bad weather."

"We are watching the price very carefully and we wish that producer countries [would] do the same. They should look more cautiously at the market and decide properly," he said.

"We are very concerned about the speed of the price move because this spike may have some negative impact on the economic recovery. That is sure," he said.

Brent crude futures traded at $97.98/b and US light crude futures at $91.20/b at 1205 GMT Monday.

--Kate Dourian, kate_dourian@platts.com

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