AUG 13 WEDNESDAY

FUNDAMENTAL UPDATES

The International Energy Agency said on Tuesday

that the tight global oil and supply balance that has

driven crude prices to record highs this year is easing,

but cautioned that healthy oil consumption in China and

geopolitical factors still threatened to tighten market conditions

in coming months.

With U.S and European consumers reducing consumption

and the Organisation of Petroleum Exporting Countries and

other producers pumping more crude , oil prices have eased

more than 20 % since topping a record of $ 147 a Barrell in July ,

the IEA said in its oil market report.

U.S oil prices traded $ 1 a barrel lower at $ 113.50 a barrel

at 0900 GMT Tuesday.

"In terms of oil fundamentals , crude abd product supply

tightness has eased ," the IEA said while adding that the

global oil market still faced many challenges.

IEA supply Analyst Mr David Fyfe said that supply

uncertainy will continue .He was referring to the oil

puipe line blast in Turkey last week that shut at least

500000 barrels a day of production and to recent fighting

between Russia and Georgia .

Chinese consumption which is seen growing by 5.6 %

in 2008 and 5.7 % next year , is essentially unchanged from

the IEA report last month.

China is the world's second biggest consumer after the

U.S but uses just about one third the amount of crude as U.S

where consumption is expected to fall 3.1 % this year , and

2 % in 2009.

The IEA thinks Chinese oil demand could rebound after the

Olympic Games in Beijing.

For the duration of the competition , the Chinese Government

has closed hundreds of factories and ordered more than 1

million vehicles off Beijings road to cut pollution.

Some Analyst dont think so , arguing that China has built up

a bounty of oil stocks ahead of the Olympics and that those

inventoties will keep a clamp on demand even after the games.

Despite easing demand, oil inventories in large consuming nations

like the U.S haven't swelled far above normal levels to threaten

sharper lower crude prices.

Inventories are a key metric closely watched by OPEC in

setting its production policy.