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Pressure on world oil markets could ease early next year due to lower demand growth and a rise in oil production, according to the International Energy Agency(IEA).

The agency said world oil demand growth would grow at a rate of 860,000 barrels per day (bpd) in 2009, reaching a total of 87.7 million bpd, down from growth of 890,000 bpd this year.

It cautioned that demand for oil products would remain strong in Asia, the Middle East and Latin America, partially offsetting lower consumption in the developed world and particularly in the United States. Demand from advanced economies is projected to average 48 million barrels a day in 2009, a decline of 1.2 percent from 2008. In the United States, demand is projected to decrease by 2.8 percent this year and 1.9 percent in 2009, partially due to rising fuel prices.

Speaking about global demand in the medium-term Nobuo Tanaka, Executive Director of the IEA warned "While we have seen some weakening in demand in the OECD, supply constraints, refinery limitations and continued demand growth in key emerging markets will maintain pressure in the market over the medium term”.

On the supply side, OPEC's largest oil producer Saudi Arabia has said it would pump 9.7 million barrels per day (bpd) in July, up from 9.45 million bpd in June.

The IEA predicts overall OPEC spare capacity will rise by approximately 1 million bpd by the end of 2008, boosted by increases from Saudi Arabia, Angola, Iraq and Nigeria.

Supplies by non-OPEC producing countries are expected to remain strong in late 2008 with an increase next year. Growth in 2009 is estimated at around 640,000 bpd, taking total production to 50.6 million bpd and reducing the need for OPEC crude to approximately 31.1 million bpd.

Output from Russia, the largest non-OPEC producer, is predicted to drop to 10 million bpd next year, the first year-on-year decline since 1996, after levelling off at 10.1 million bpd this year.

The report suggested that whilst demand would strengthen in 2009, market tensions could diminish early next year after peak winter demand in the northern hemisphere passes and new refineries begin production.

"Supplies should increase over the second half of the year and into 2009 as new refining capacity comes on stream in both China and India,'' the IEA said in its monthly Oil Market Report."

"There is potential for the current tightness to start to ease slightly in third quarter 2008, but that may be overly optimistic," the IEA said.