Rocketing oil prices have hit demand in the world's top energy consumers, China and the United States, and OPEC needs to raise output around June to douse further price rises, the International Energy Agency said.
The price of crude, if sustained at $100 a barrel or more for the rest of 2011, would cause similar demand destruction as the world experienced in 2008 that led to the global economic crisis, IEA Executive Director Nubuo Tanaka said on Wednesday.
"We have already observed slower oil demand growth rates in China, where import growth fell from a 16 percent increase in December to just 9.6 percent in February. Clearly, the speed of growth is declining," Tanaka told Reuters.
"Part of it would be monetary tightening but high oil prices also play a big role. The government has been deregulating the gasoline prices each month and certainly, that has eaten up some parts of the demand growth."
Warnings of a demand destruction have grown after world oil prices rocketed up to 2-1/2-year highs of $127 a barrel earlier this month amid worries of unrest in the Middle East and North Africa.
OPEC ministers on Monday warned that costly oil could place a major strain on consumer countries with fragile economies, in their clearest statements yet that they believe fuel demand has shrunk.
With global oil demand expected to increase in around June or July as European refineries come back online and as Japan begins reconstruction activities, Tanaka called on Saudi Arabia to pull its weight to prevent a surge in prices.
"As Minister Al-Naimi has always said Saudi will fill the gap. So please, OPEC countries will need tomake sure this will happen when the demand is coming back," he said, adding that Saudi Arabia may have about 4 million barrels per day of spare capacity.
Japan's nuclear crisis would also lead to higher gas demand in the coming years, a trend which would help absorb the current global gas glut, Tanaka said.
"We previously forecast the glut to stay until the end of the decade but now we think it will be shorter," he said.
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