Oil near $136, IEA sees supply constraints easing

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Oil near $136, IEA sees supply constraints easing

LONDON - Oil held near $136 a barrel on Thursday, after falling for three straight sessions, supported by tensions over Iran. These were however offset by International Energy Agency predictions of a more comfortable supply outlook next year.

By (Reuters)

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Published: Thu 10 Jul 2008, 7:05 PM

Last updated: Sun 5 Apr 2015, 12:48 PM

U.S. crude for August was 53 cents up at $136.58 a barrel by 1138 GMT. London Brent crude was 60 cents firmer at $137.18 a barrel.

Iran tested more missiles in the Gulf on Thursday, while the United States pledged to defend its allies.

"A second day of missile tests probably has less impact on prices than on the first day," said Mike Wittner, analyst at Societe Generale.

Iran test-fired nine missiles on Wednesday, which it said included ones that could hit Israel and U.S. bases.

Tensions over Iran have mounted after a big Israeli military exercise last month. The West fears Iran wants to master technology to build nuclear weapons.

These tensions boosted gold on Thursday, which was also supported by sagging equity markets.

Political tensions in the Middle East have played a part in oil's surge this year to record levels of more than $145 a barrel.

Toll on demand

But high prices are starting to take their toll on demand.

World oil demand growth will slow in 2009 and the need for oil from the Organization of Petroleum Exporting Countries will fall, the International Energy Agency said in its monthly report.

This could help relieve the perceived tight supply/demand balance in the world oil market that has contributed to around a 50 percent jump in prices this year.

"We do see the potential for a build in spare capacity in 2009, that should help to improve the situation," said Lawrence Eagles of the IEA, which advises 27 industrialised countries on energy policy.

A pledge from Saudi Arabia to increase output this year could help provide more of a cushion for the market, he said.

"Supplies will still be tight, but less tight than they were," said Damien Cox of John Hall Associates. "I don't think it means a massive fall in prices."

Oil has fallen back from a record peak of $145.85 on July 3, but had found some support from Iran tensions which helped the market hold above $135.50 a barrel on Wednesday, a key number for traders who use charts to track price movements.

The main militant group in Nigeria's oil-producing Niger Delta has said it would call off a ceasefire from midnight on Saturday after Britain offered to help tackle lawlessness in the region that has disrupted the country's oil exports.

China's net imports of refined oil products in June rose a quarter from a year ago, according to official data, offsetting weak crude import growth in the world's number two consumer.

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