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IEA Raises Oil supply concerns

The International Energy Agency (IEA) has warned that the world could face an oil supply crunch later this year unless the OPEC group of countries can significantly step up production in the coming months.

The Paris-based agency last week issued a monthly report detailing how "OPEC countries would need to hike third-quarter production by another 900,000 b/d from April levels".

The report confirmed that following a five-month low in March, April had seen a boost in OPEC oil production of 405,000 barrels a day, while global production rose 700,000 barrels a day month on month. However, the IEA also raised its global demand forecast for this year, driven by strong demand from India, China and Saudi Arabia, and warned that OPEC production would now have to rise again to meet forecasted demand in the second half of the year.

The agency said the cartel had "more than enough capacity to deliver", but warned that "it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries recently".

Concerns remain that security issues in several north African countries are hampering efforts to increase OPEC production, while the Financial Times reported last week that political turmoil in South Sudan and Colombia as well as continued delays at the Kashagan offshore field in Kazakhstan were leading to lower-than-expected production from non-OPEC nations.

With the IEA also suggesting oil inventories globally are relatively tight, the latest forecasts will fuel fears of higher prices and again provide ammunition to those who warn the global economy could soon face a peak-oil scenario.

The oil industry has repeatedly rejected warnings about a peak in supplies, arguing that plenty of reserves are available.

But advocates of peak-oil theories have argued that flow rates are in danger of peaking, pointing to the drastic increase in capital investment oil companies have been forced to make in recent years, which has failed to deliver a commensurate increase in production.

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