IEA forecast fuels futures trade

Oil climbed above $58 a barrel today as the International Energy Agency (IEA) boosted its 2007 demand forecast and said it saw tightening oil market fundamentals.

US crude was up 64 cents at $58.45 a barrel at 1526 GMT, after dropping $2.08 or nearly 3.5% yesterday on signs that Opec will refrain from further supply cuts when it meets next month.

London Brent crude rose 31 cents to $56.91 a barrel.

The IEA said rising consumption in the world's second largest consumer, China, prompted the agency to raise its 2007 demand growth forecast.

Global oil demand will grow 1.55 million barrels per day this year, up from a forecast of 1.39 million bpd a month ago, the IEA said in its monthly Oil Market Report.

"Upward demand revisions, a now-weaker non-Opec growth trend and declining Iraqi production all point to markedly tighter global balances," said the IEA, which advises 26 industrialised nations.

Non-Opec output growth continued to miss forecasts as new projects were delayed, while Iraq's dilapidated oil sector struggled to maintain output.

The IEA noted that Opec supply curbs helped to drain stockpiles in major consuming countries of 40.2 million barrels in December and that downward trend continued in January.

The agency said that any further Opec cut beyond its existing reduction of 1.7 million barrels per day might be a step too far in the group's efforts to balance supply and demand.

Investment bank Goldman Sachs said that lower oil prices since September had boosted demand and that it expected inventories to drop further in coming months.

Goldman said that by this time next year, it expected the price of oil to have risen to $71.90.

Goldman is the most bullish of banks and analysts in a Reuters oil price poll, forecasting the average price of US oil at $71.50 for the whole of 2007.

Stocks of heating fuel in top consumer the US are expected to fall in government data due out tomorrow, after a recent cold spell stoked demand.

A Reuters poll of analysts forecast US distillate stocks, including heating oil, to slide 4.4 million barrels.

US crude stocks are forecast to have risen 1.4 million barrels as imports increased.

Anxiety over Iran's nuclear programme is still a supportive factor for oil prices, traders said.