updated 8/11/2004 9:18:48 AM ET 2004-08-11T13:18:48

The world oil market is tight and uncertain, the International Energy Agency (IEA) said Wednesday, but it questioned whether soaring prices were justified while supply still exceeds demand.

“Limited spare production capacity combined with security warnings and headline news about Russia, Iraq, Venezuela, China and monthly employment, industry activity and confidence statistics are propelling the market,” the Paris-based agency said in its monthly report.

“The market is tight, production and infrastructure capacity is less than desired and uncertainties continue to weigh on the market,” it added. “But, does this justify $45 oil? Current oil prices are a concern and are causing economic damage.”

Oil prices remained near record highs Wednesday.

The Paris-based IEA, the energy watchdog for wealthy oil-importing countries, said the market is tight, “but the market has been living with greater uncertainties for quite some time now. It has a buffer to cope with potential supply disruptions.”

“Yukos (the Russian oil company) is exporting more than it did this time last year and earlier this year. Supply is running ahead of demand. Saudi Arabia has the ability to raise production in the short term. Crude is on offer,” its report said.

However, the agency said the trend in the futures markets suggested it was unlikely that prices would decline significantly in the near term.

“Relatively high prices throughout the futures strip suggest that current sentiment leans toward expectations for high prices to continue through the winter and into next year,” the IEA said. “It is important to note, however, that sentiment is fickle and can change rapidly subject to new events.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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