Riyadh, 20 october 2010

Oil market fundamentals are likely to remain unchanged next year as long as OPEC maintains the same level of production, the head of the International Energy Agency said on Tuesday.

Oil prices have remained firm this year mainly due to the weakness of the dollar, but U.S. crude oil futures fell some $2 to around $81 on Tuesday as a rise in China's interest rates led to a rise in the value of the U.S. currency.

"The market is very well served and oil is well produced," IEA Executive Director Nobuo Tanaka told Reuters.

"So in terms of the fundamentals, if the current situation continues there might not be much difference in market fundamentals for quite a long period in 2011. If OPEC continues the same production."

Last week, OPEC agreed to do just that, maintaining the same level of supply it has kept for nearly two years. But low interest rates could drive prices higher as investors attempt to make higher returns by speculating in other sectors such as oil.

"Speculation will always be there, and it's hard to say to what extent it would influence prices in the future," Tanaka said in an interview.

Oil markets are also watching the effect of U.S. quantitative easing measures expected next month designed to boost the American economy.

"Quantitative easing is necessary to maintain the healthy growth of the economy at this time. If the economy strengthens then the dollar could be strengthened, but if the dollar is not strengthened then it would have another impact on oil prices," Tanaka said.

The IEA, which advises major industrial countries on energy policy, has slightly revised upward its forecast for the growth in world demand to 2 million barrels per day (bpd), said Tanaka.

Next year growth is expected to be around 1.2 million bpd, he said. "The growth will mainly be from non-OECD countries," Tanaka said.

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