The need for more OPEC oil is growing more urgent to avoid a worrying drop in global inventories faced with ever rising demand, the International Energy Agency said on Friday.
The adviser to 26 industrialised countries said it was also closely monitoring financial markets, rattled by the deterioration of the U.S. subprime mortgage sector, and their potential impact on global oil demand.
In its monthly Oil Market Report, the IEA repeated its call for the Organization of the Petroleum Exporting Countries to increase production when it meets in September in Vienna.
"OPEC is leaving things late if it is to sustain market balance and avoid a sharp tightening of inventories," the report said. "A counter-seasonal stock draw during the third quarter looks likely ahead of the northern hemisphere winter."
The IEA said demand will rise by an average 2.2 million barrels per day in 2008, unchanged from its July estimate and up from this year's 1.5 million bpd.
Oil demand next year will average 88.2 million bpd, the agency said. Most of the growth will come from China and the Middle East.
"With risks over non-OPEC supply and global demand arguably lying in the same direction (downward), there appears to be little chance of overshoot were OPEC to raise supply to the market," the report said.
The IEA pegged demand for OPEC oil in 2008 at 32.1 million bpd, up 700,000 bpd from this year but 200,000 bpd less than its July estimate.
OPEC, which agreed last year to cut output, says current supplies are enough to meet demand in the 86 million bpd world market.
The IEA's outlook comes as oil prices have traded above $70 for the past five weeks.
U.S. crude oil futures rose to an all-time high of $78.77 last week, but prices have since fallen amid a sell-off in equity markets due to a global credit squeeze.
Lawrence Eagles, head of the IEA's Oil Industry and Markets Division, said it was far too early to know whether problems in the U.S. subprime mortgage sector will impact global oil demand.
"It's premature to say at this point what impact it is going to have on global oil demand. But it is something we have to watch closely," he said.
Some analysts said the IEA was ambitious in its oil demand growth forecast next year, especially as U.S. economic growth has weakened.
"We have a potential moderation as the economic cycle in the United States turns you will slow the rate of demand," said Harry Tchilinguirian, oil analyst at BNP Paribas.