IEA warns of 'overheated' oil costs

The International Energy Agency (IEA) has warned that the recent rises in crude oil are causing oil prices to get "overheated".

Oil prices were at 87 dollars a barrel last week - the highest since October 2008 - and the IEA said crude costs, which recently touched 18-month highs, were rising too fast for a fragile economic recovery.

Although some recovery in demand has supported prices at around 70-80 dollars a barrel, the IEA has said it is concerned over "the sustainability of prices markedly higher than those levels".

The recent oil surge has hit motorists, and coupled with duty hikes and a weak pound, has caused pump prices to touch an all-time high.

It also raises the possibility of a rise in oil prices similar to the market-driven increase in 2008 which pushed crude to a record 147 dollars a barrel.

The development could also stem off recovery in developed Organisation for Economic Co-operation and Development (OECD) countries, it added.

An export-based recovery in Europe led by manufacturing "appears to be ebbing", and the IEA said higher prices could potential come down harsh on developed economies.

"Any potential renewed surge in prices... plus tighter credit than two years ago, could stall OECD economic recovery or render it more 'oil-less' than we currently envisage," the report warned.

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