IEA Says Oil Prices Could Fall Further

PARIS — Crude oil prices could fall further from this month's record high of $100 per barrel because of weakness in the U.S. economy, the International Energy Agency said Wednesday.

Still, rising demand in China, tensions in Nigeria and the Middle East, and falling oil stocks remain "supportive factors" for prices, the Paris-based agency said in its monthly oil market report.

A "rapid retreat" in crude oil prices from the $100 mark earlier this month shows "how volatile markets remain and, in early 2008, there would appear to be some downside potential," the report said.

Light, sweet crude for February delivery fell $2.30 to settle at $91.90 a barrel on Tuesday _ down from the record high of $100.09 a barrel on Jan. 3. By midday Wednesday, the contract was down another $1.72 to $90.18 a barrel after sinking as low as $89.26 earlier. It was the first time since Dec. 19 the price of crude fell below $90.

World oil demand is expected to rise by 2.3 percent this year to 87.8 million barrels per day, the IEA said, which represents a slight cut from last month's prediction that demand would rise by 2.5 percent this year. The agency added that its forecast could change further if the economic slowdown in the U.S. _ a major oil consumer _ worsens. Weakening U.S. demand would only be "partially" offset by strong economic growth in China and the Middle East, the report said.

However, the IEA said its preliminary figures showed U.S. demand has not declined despite higher pump prices, and increased 0.1 percent in November compared with the same month a year earlier.

In China, a gasoline and diesel shortage suggests "that pent-up demand is significant," the IEA said, citing an "exponential increase" of energy use along with increased demand for cars, trucks, and planes, among other oil-consuming items in the booming Chinese economy.

Production from Iraq fell slightly to 2.3 million barrels per day in December, after hitting a 3 1/2-year high in the previous month, the IEA said. The agency said it was revising upward its estimate for Iraqi output in November to 2.4 million barrels per day, from 2.3 million.

The IEA said Iraq has signed an agreement with an affiliate of Russia's Gazprom to study the reactivation of 300,000 barrels per day of pipeline capacity from Kirkuk to Banias, Syria, that has been out of operation since before the U.S.-led war in Iraq began.

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