If the price of crude remains around $70 a barrel – or rises yet further still – it will damage the fragile process of global economic recovery, claims Fatih Birol, Chief Economist at the International Energy Agency (IEA).

In a warning to the Organisation of Petroleum Exporting Countries (OPEC) Birol advised when they next convene, on September 9, that they do not attempt to cut production output in order to boost global prices – as it would crimp the slow process of economic recovery which is already underway.

To date, OPEC – who provides around a third of global oil supplies – has reduced its combined production output by 4.2 million barrels per day (bpd), in response to a drop in demand in the midst of worldwide recession.

Installing his faith in OPEC, Birol said: “The decision I think they will take will foster the economic recovery, rather than dampen the economic recovery hopes.”

Since the turn of the year the price of the U.S. light, sweet crude has more than doubled from lows of $32 a barrel, to trade at $70.80 during trading on the New York Mercantile Exchange (NYMEX), on Tuesday.

Birol said that the IEA will revise its forecast that saw upstream investment fall 21% in 2009, adding that he saw more order cancellations than new investment.

Birol also forecast that Europe will face a glut of gas by the year 2015, making the situation increasingly harder to drum-up support for two rival gas pipelines planned to run across Turkish territory - the Nabucco pipeline project which is backed by the European Union and the South Stream project which is backed by Russia.

The Nabucco pipeline aims to deliver 31 billion cubic metres of gas to Europe by 2014, while its rival the Russian South Stream plans to pump Russian gas from 2015 onwards.

In addition, this week the IEA warned that levels of global oil production will peak in around 10 years time. Birol’s forecast that with adequate governmental response, oil shortages could precipitate a worldwide economic and industrial collapse makes grim reading.

IEA data suggests that the world’s biggest oil fields have already passed peak production and that the rate of decline is already running at twice the pace calculated by the intergovernmental organisation as recently as two years ago.

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