Oil rise 'Could Derail Recovery'

Oil plant in the middle of the sea

The International Energy Agency (IEA) has warned that the recent rise in the price of oil “risks derailing the recovery” if it continues.

The IEA says oil demand will also rebound much more slowly, if prices continue to rise in 2010.

The price of oil has risen by 77 percent this year and is now trading at about $79 a barrel.

It also warned that signs of renewed economic growth remained “tentative.”

In its monthly report, the agency said China was driving demand and revised upwards its forecasts.

It predicts that in 210 there would be a 1.6 percent increase in demand to 86.2 million barrels a day.

The IEA said that in the US, the real economy as opposed to the financial one, would struggle to recover, adding that if the government withdrew its stimulus spending measures, the economy could choke again and cast further gloom on an already depressed job market.

It added that economies in developed countries were still fragile, and that demand for oil in those nations was dropping away after prices hit $80 a barrel.

“If prices keep rebounding, there is a risk to the global economy as a whole, even to some of those economies in the Far East and the Middle East,” said David Fyfe, Head of the IEA's Oil Industry Division.

However, the IEA also said global oil demand would grow in the fourth quarter of this year, the first year-on-year increase in fuel use since the second quarter of 2008.

But it raised global oil demand forecasts for 2009 by 210,000 barrels to 84.8 million barrels a day.

Meanwhile, the IEA said that the oil producing cartel OPEC, pumped more oil in October than in September.

Source: BBC