OECD oil stocks seen at 57 days on demand: IEA

KUALA LUMPUR (Reuters) - The International Energy Agency (IEA) expects OECD oil stocks to fall to 57 days by year-end from the current 63 days, if OPEC's production continues at current levels, along with the recovery in demand.

"If economic and demand recovery comes back as we have been projecting and also if oil production by OPEC continues at current levels, we project a decline in stock levels toward the end of the year to normal levels -- four- to-five-year average cover of 57 days," IEA's head Nobuo Tanaka told Reuters at the sidelines of an industry conference.

"Now it's 63 days for the OECD stocks level," he said.

Analysts said the general rule has been that 50 days of forward cover is very bullish for oil prices, 53 days is bullish, 57 days bearish and 60 days very bearish.

Saudi Oil Minister Ali al-Naimi has been quoted as saying the Organization of the Petroleum Exporting Countries (OPEC) would wait until inventories fell to around 53 days of forward cover before considering raising output.

The implication is that even if prices rise sharply, OPEC might not release more oil if it considers there is still oversupply in the market.

Tanaka said the direction of prices are always determined by fundamentals and speculation just amplifies the volatility.

"This is probably a turning point (in the demand recovery) or we are very close to it," he said.

"If prices moved like this, it could be that recovery has already happened but the speed (of the oil price rally) is very fast, we have to watch very carefully."

U.S. crude has doubled since hitting the low $30s in mid-December to $67.25 a barrel on Monday, but still off the highs of above $147 a barrel reached in July last year.

RENEWABLES HIT

Tanaka said last week that global oil demand has not rebounded to a level justifying seven-month price highs, and a rapid rise could damage the prospects for a wider economic recovery.

He said the IEA is projecting a supply crunch from 2014-2015 on the assumption that world economic growth recovers to a 5 percent rate by 2011-2012. On a 3 percent growth assumption from the same period, Tanaka said the squeeze may be averted.

The IEA is expected to publish the scenario report at the end of the month, he said.

The expected one-fifth drop in oil industry investments this year will hurt small and independent companies the most, a trend that may disrupt developments of renewable energy projects and eventually take a toll on the environment, Tanaka said.

"Compared to conventional energy, renewables such as nuclear power are affected much more because they are more capital intensive," Tanaka said, citing many renewable project initiatives lie in the hands of these smaller, independent firms.

He estimates that G20 countries have committed only $100 billion out of the $2.6 trillion worth of investments pledged in stimulus packages so far to low-carbon projects, just a quarter needed for a target to reduce carbon emissions by half by 2050.

"The mitigation of climate change may face a problem, and that is an element that governments should think about," he said.

(Editing by Ramthan Hussain)