IEA sees world oil supplies staying tight

By Alex Lawler

LONDON (Reuters) - World oil supply will rise more slowly than expected by 2013, leaving little spare capacity on the market despite weaker demand growth, the International Energy Agency said on Tuesday.

In its Medium-Term Oil Market Report, the Paris-based agency said global supply capacity will reach 95.33 million barrels per day (bpd) by 2012, some 2.7 million bpd less than its previous forecast a year ago.

The outlook signals little relief from high oil prices, which have hit record peaks above $140 a barrel on supply concerns and robust demand in Asia and the Middle East, adding a strain to the world economy

"Structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture over the medium term," said the IEA, which advises 27 industrialised countries.

High prices and slower economic growth are expected to weigh on world demand, although it is forecast to expand faster on average than additions to global supply in the next five years.

Emerging markets are likely to remain the driver of demand. Some 90 percent of the growth is expected to come from Asia, South America and the Middle East, reflecting rising wealth and growing populations.

Consumption will rise by an average 1.6 percent a year between 2008 and 2013, or 1.5 million bpd on average, the IEA said, down from a previous medium term forecast of 2.2 percent.

Annual supply additions will match or exceed average demand growth through 2010 but slow to less than 1 million bpd from 2011 to 2013. Average total supply growth in the period stands at 1.15 million bpd a year.