UPDATE 1-IEA says speculation amplifying oil prices moves

Tue Jun 30, 2009 2:13pm EDT

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WASHINGTON, June 30 (Reuters) - Fundamentals are currently determining the direction of crude oil prices but speculators are amplifying those moves, the head of the International Energy Agency, Nobuo Tanaka, said on Tuesday.

"Our analysis shows that the fundamentals are deciding the direction of the price while these funds or speculations ... are amplifying the movement," said Tanaka.

Tanka also told reporters he was concerned about investment in unconventional sources of oil, but added many oil fields could be developed at current prices.

"We are concerned still that the current level of investment in the context of the prices," he said.

Slumping oil demand knocked crude off record highs near $150 a barrel struck in July last year, causing some oil companies to scale back investments.

Optimism that a potential economic turnaround could lift flagging oil demand has sent crude up from below $40 a barrel in February to over $70 a barrel this week. On Tuesday, prices dropped more than 3 percent, below the $70 mark after grim U.S. consumer confidence data. (Reporting by Ayesha Rascoe and Roberta Rampton; Editing by Marguerita Choy)

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