Oil body warns of 'overheated' crude price

Recovery in the world's biggest economies could be jeopardized if crude oil prices stay over $80 US per barrel, the International Energy Agency said Tuesday.

The IEA also reported that OPEC posted the first "significant drop" in output in March in more than a year falling 190,000 barrels per day to 29 million barrels a day largely due to a near 10 per cent drop in Iraqi output.

The agency, the energy arm of the Organization for Economic Co-operation and Development, said concerns remain that global oil markets are "overheated," with crude around $85 per barrel.

"Ultimately, things might turn messy for producers if $80-100 (per barrel) is merely seen as the new $60-80 (per barrel), stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment" the Paris-based IEA said in its monthly oil market report.

Benchmark crude for May delivery was down 76 cents to $83.58 a barrel in electronic trading on the New York Mercantile Exchange on Tuesday.

The OECD's members include Canada, the United States, Japan, United Kingdom and many of the leading European countries.

Price subsidies that benefit consumers in non-OECD countries like China and India, and tighter credit than two years ago "could stall OECD economic recovery or render it more oil-less than we currently envisage," it said.

The IEA said that operational problems and weather-related export disruptions at its southern terminals drove down Iraqi output by 220,000 barrels per day last month. But the agency noted that Iraq's exports hit a two-decade high of 2.07 million barrels a day in February, and total exports in March were tallied at 1.79 million.

The IEA estimated global demand in 2010 would rise by 30,000 barrels a day in 2010 to 86.6 million barrels a day compared to last month's report. Demand for 2009 was revised down by 70,000 barrels to 84.9 million.

The agency said OPEC kept its output targets unchanged last month largely on expectations that global oil demand will pick up later this year to absorb above-target production.

Oil prices have been hovering around 18-month highs of $80-85 US per barrel. The international oil cartel is not expected to meet again until Oct. 14 in Vienna.

Qatar's oil minister said last week that crude's recent rally is driven mainly by speculation, not a shortage of supply, and dismissed the likelihood that OPEC would hold a special meeting to re-evaluate current production.