IEA says high oil dents demand growth

By Barbara Lewis

LONDON (Reuters) - High oil prices are eroding global demand growth, which should have a positive effect on world supplies, the International Energy Agency's head said on Monday.

But IEA Executive Director Claude Mandil cautioned that the long-term trend was so far unclear.

"We have the impression that high prices are denting demand growth," Mandil said at a Reuters Energy Summit.

"That would be very much welcome. It would demonstrate that the market mechanism is working and it would be the best way to slightly increase spare capacity."

"We would like to have two-to-three months' figures before deciding it's a long-term trend," he added. "We still need to be very cautious."

Even if demand eases, the world would struggle to cope with any severe supply disruptions as happened last year when hurricanes knocked out a swathe of production and refining capacity in the U.S. Gulf.

The IEA, adviser to 26 industrialized nations, ordered the release of strategic stocks held by its members, which helped to lower prices from above $70 a barrel for U.S. crude CLc1.

Mandil said the release had been largely a success and the agency was ready to repeat its action if necessary.  Continued...