High oil prices remain a threat to economic growth, warned the International Energy Agency (IEA) ahead of Opec's biannual meeting.
Increased levels of oil production from Opec nations have succeeded in pushing oil prices down from the elevated levels reached at the beginning of the year. Several members of the group are expected to push to curb output at the meeting which officially starts in Vienna today.
"Memories are indeed short: crude prices remain very high in historical terms and are acting as a drag on household and government budgets in OECD [Organisation for Economic Cooperation and Development] and emerging markets alike," said the IEA in its latest monthly report. The organisation represents OECD countries.
Prices have been falling on weaker crude demand in struggling economies across Europe, Asia and North America. High production allowed OECD inventories to rise to 2,643 million barrels in April, said the IEA.
China, the world's biggest importer of oil, has also made use of high Opec production to increase its stocks.
In its report, the IEA rejected calls made by Opec members Venezuela and Iran to cut the voluntary production ceiling imposed at the group's last meeting.
"Higher Opec production sits against a backdrop of tight end-2011 inventories, stubbornly high oil prices and persistent uncertainty over non-Opec and Iranian supply for this summer," said the report.
Opec is producing at levels close to 32 million barrels per day (bpd), well above its 30 million bpd ceiling. Led by Saudi Arabia, the group reacted to an increase in the oil price that drove Brent to levels of US$125 a barrel, as concern over the stand-off between Iran and western powers gripped the market.
Increased Saudi production compensated for a reduction in Iranian exports, while the resumption of talks over Iran's nuclear programme has reduced the risk premium on oil prices. Brent now trades at about $97 a barrel.
Rafael Ramirez, Venezuela's energy minister, yesterday told a meeting in Vienna a price of $100 per barrel "represents the minimum necessary" for the industry, having on Tuesday called on Gulf producers to cut output.
Iran has this week vehemently rejected suggestions the Opec ceiling may have to be raised to accommodate current production.
By The National