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Oil prices likely to fall on slower demand growth: IEA

Factors behind record-high oil prices may be easing, the International Energy Agency signalled yesterday, reporting increases in supply and signs that growth of demand may be slowing in China.

The agency revised down slightly its estimate for world demand for oil this year by 50,000 barrels per day to 84.3 million barrels per day.

Cold weather and strong global growth had pushed up oil prices but interest rate rises, the arrival of the northern hemisphere spring, increased production by OPEC and growing stockpiles were likely to ease tensions in the oil market, the IEA estimated.

In addition "fears of a surge in second-quarter Chinese demand are receding."

Overall "there seems less reason for concern" about the course of oil prices, the agency, an offshoot of the Organization for Economic Cooperation and Development, said.

The IEA highlighted the following estimated figures:

Cold weather from the middle of February raised OECD demand on a 12-month comparison by 1.28 million barrels a day in February. But this was offset in part by an "apparent" reduction of demand in former Soviet Union countries.

Additionally, the growth of demand for oil in China slowed to 5.4 percent in the first two months of this year, "well below the 20.8 percent growth seen a year ago."

Estimated global oil demand for this year, meanwhile, was being revised down slightly by 50,000 barrels per day. Last month, world oil supply rose by 365,000 barrels per day to 84.2 million barrels per day from a lower February base.

Additionally, output by producers outside OPEC rose by 60,000 barrels per day to 50.4 million barrels per day.

OPEC output rose by 290,000 barrels per day in March to 29.1 million barrels per day owing to increases by Saudi Arabia and the United Arab Emirates.
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