Oil rises after slipping from earlier record

London: The world is in a state of "oil shock", the International Energy Agency chief said as fresh concern over long term supply shortages emerged.

"We are clearly in the third oil price shock," IEA chief Nobuko Tanaka said as he presented a report describing longterm supply and demand needs.

His agency's report said the world's estimated daily oil needs would rise from 86.87 million barrels this year to 94.14 million barrels in 2013, which is less than the earlier prediction.

Oil continued to rise on Tuesday based on the IEA report and as tension between Israel and Iran strained further.

US crude rose $2.06 to $142.06 a barrel by 1126 GMT while London Brent crude rose $2.41 to $142.24.

The IEA said world oil demand would increase less than previously forecast, but it also said supply would be tighter than anticipated.

Saudi Arabia's King Abdullah said increasing production will not ease rising prices because speculation and taxes are behind the soaring market, a report in a Kuwaiti newspaper said on Tuesday.

"People who think that oil prices will go down once production is raised are wrong because there are indications the prices will remain high," the Arab Times quoted the ruler of the world's largest oil exporter as saying.

On Monday, Saudi Arabia's oil minister reiterated that the prices were driven mostly by speculation but they were ready to supply as much oil as needed.

The Iran-Israel conflict over Iran's nuclear programme and fears of restricted flow from the region pushed oil to a new record at $143.67 on Monday.

Roughly 40 per cent of the world's traded oil moves through a waterway Iran threatened to restrict if attacked by Israel.

The US responded by saying they would not allow Iran to control the passageway.
Diminishing demand from the United States also raised concerns. The US Energy Information Administration revised US April oil demand by 863,000 barrels per day (bpd) to 19.77 million bpd, 3.9 per cent below year-ago levels.

The revision, which showed April demand was the lowest for the month since April 2002, came even before gasoline prices surged to new records in June.