Oil prices are likely to stay high due to geopolitical risks despite a dramatic improvement in world supply resulting in a big build in stocks, the International Energy Agency (IEA) said on Friday.
The agency, which advises 28 industrialised nations on energy policy, said global oil supply rose 600,000 barrels per day (bpd) to 91 million bpd in April and was now 3.9 million bpd over year ago levels, with 90 percent of the increase coming from OPEC.
But the IEA said in its monthly Oil Market Report that uncertainty remained and the agency, which last year released strategic oil stocks to compensate for the outage of Libyan production, would be ready to act if necessary.
"The path of market fundamentals for the rest of the year remains highly uncertain and geopolitical risks will likely continue to keep prices high," the IEA said.
"The IEA will monitor market conditions and stands ready to act if supply conditions warrant it."
The agency kept its forecast for global oil demand growth this year broadly unchanged, raising it by just 20,000 bpd from its previous report to 790,000 bpd.
This would bring global oil consumption this year to around 90 million bpd, it said.
World oil supply was likely to more than match the increase in demand, the IEA said. OPEC oil supply had risen by 410,000 bpd in April, with Iraq, Nigeria and Libya providing 85 percent of the increase, well ahead of demand for OPEC oil.
The IEA's estimate of demand for OPEC oil for 2012, its 'call on OPEC crude and stock change', was raised by 200,000 bpd to 30.3 million bpd.
At the same time, non-OPEC supply would grow by around 600,000 bpd this year, helping inflate oil inventories.
OECD commercial oil stocks had risen above the five-year average for the first time since May 2011, bringing forward demand cover to 60.3 days of consumption, three days above the five-year average, it said.