With China's economy expanding rapidly and a recovery simmering in other countries, demand for oil will increase faster than expected this year and in 2004, the International Energy Agency said Wednesday.

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Demand has surged this autumn in the United States and several other industrialized nations, while Chinese demand appears to be advancing "at a breakneck pace," the agency said in its monthly oil market report.

Even with consumption on the rise, analysts said oil-producing nations should not have trouble supplying the market with enough fuel to maintain reasonable energy prices for motorists and homeowners.

The global appetite for crude in 2003 will grow by a robust 1.9 percent, or 1.44 million barrels a day, and in 2004 by 1.5 percent, or 1.16 million barrels a day. The IEA raised its estimates for daily demand growth in the two years by 160,000 barrels and 90,000 barrels, respectively.

Crude supplies grew only half as fast in November as in October, due partly to a leveling off in production from oil fields in the North Sea, and tight oil inventories have contributed to swings in already-high crude prices.

Although OPEC (news - web sites) members agreed to cut their production beginning Nov. 1, they still pumped 1.2 million barrels a day above their output ceiling, the IEA said. Analysts say this cushion of excess production has helped somewhat to moderate crude prices ahead of the peak winter demand for heating oil in the northern hemisphere.

"There is more than enough supply" when you take into account non-OPEC production, said Ken Miller, an oil and refined products analyst at the Houston-based consultancy Purvin & Gertz.

"Our projection is for oil prices to drop, but not substantially," Miller said. Of course, even if the raw material for heating oil and gasoline is cheaper, factors such as weather and refinery operations also affect retail prices.

The IEA, headquartered in Paris, is the energy watchdog for the world's biggest oil-importing countries.

Chinese demand for crude jumped by 11.5 percent in October, though this growth will slow as China becomes constrained by limits on its capacity to generate electricity, the agency said.

"The pull from the Far East has taken over from the typical U.S.-centric focus as the key driver for the oil market," it said.

Paul Horsnell, head of energy research at Barclays Capital in London, agreed that China's thirst for oil imports has become a significant factor in global markets. China is a top oil importer after the United States, and both countries are leading the global economic recovery.

"It's been quite a while since we've seen the Chinese and U.S. economies going on all cylinders," Horsnell said.

But while the IEA increased its forecast for worldwide oil demand, it reduced its earlier figures for demand inside countries of the former Soviet Union.

The agency said it had understated the amount of crude that Russia and other ex-Soviet states have been exporting by rail and said it incorrectly classified these exports in the past as barrels consumed inside these countries. In its report, the IEA reduced its 2003 estimate of oil demand in former Soviet countries by 330,000 barrels a day.

World oil supplies rose in November to 81.7 million barrels a day, up 625,000 barrels a day — or 0.8 percent — from October. OPEC contributed 285,000 barrels of this increase, while non-OPEC producers such as Angola, Brazil and Russia chipped in the rest, the IEA said.

Iraqi output continued to increase, despite sabotage that has forced the closure of one of Iraq (news - web sites)'s two main export pipelines for crude. Iraq boosted its daily oil production by 320,000 barrels last month for a daily total of 1.9 million barrels, the agency said.

Yet if production trends continue, Iraq will soon reach the limits of its capacity to export oil from its lone operable terminal in the Gulf. Unless it finds alternative export routes, Iraq may fail to achieve its goal of producing 3 million barrels a day in 2004, the report said. Russia, which vies with OPEC's Saudi Arabia as the world's No. 1 crude exporter, increased its exports by 20 percent during the first 10 months of this year compared with the same period of 2002, according to the official OPEC news agency.

However, the IEA argued that Russian output was "critically dependent" on political issues raised in the current dispute between the senior management of Yukos, Russia's largest oil company, and the Russian government. Russia's crude output could suffer if the dispute slows the expansion of its oil majors, the report said.

Oil prices remain high but volatile due to low inventories and geopolitical uncertainties ahead of the winter heating oil season. Contacts of U.S. light, sweet crude reached a post-Iraq war peak of $33.20 per barrel in November but settled back for a monthly average of $31.06, the agency said.

In late afternoon trading Wednesday in New York, light sweet crude oil for January delivery was up 12 cents to settle at $31.88 a barrel.

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