World crude oil supply temporarily tight

PARIS, July 14 (UPI) -- A Paris energy agency says tightness in the world's crude oil supply chain makes it vulnerable to disruptions and price hikes during the next few months.

The International Energy Agency estimated oil demand this year has grown by 2.3 million barrels a day or 2.9 percent to 81.1 million, the steepest annual increase since 1980, the Wall Street Journal reported Wednesday.

Meanwhile, the world's margin of spare production capacity appears to have dipped below 2 percent of demand -- perhaps below even 1 percent -- for the first time since the oil crises of the 1970s.

Last year, spare production capacity was about 4 percent.

The currently thin production margin makes for price volatility.

"It's a tight window of vulnerability" in the third quarter, says Ann-Louise Hittle, an analyst in Boston for Wood Mackenzie. Oil producers outside OPEC typically produce at maximum capacity, leaving the cartel as the last resort to meet world demand in a pinch, she said.

Wood Mackenzie estimates that OPEC, excluding unpredictable Iraq, only has about 800,000 barrels a day of idle capacity in the current quarter.