"Overall, both in terms of spare upstream capacity and refinery flexibility, 2008 looks at this stage to be slightly more comfortable than 2006 and 2007," it said in its monthly oil market report.

The energy watchdog raised its 2008 forecast for oil product demand by 2.5 percent to 88.2 million barrels a day "largely due to a weather-related rebound in the OECD and strong demand in non-OECD countries," notably China and the Middle East.

The OECD groups 30 industrialised nations, including the Group of Seven, Britain, Canada, France, Germany, Italy, Japan and the United States.

The IEA said its 2008 demand growth projection "represents an increase of 2.2 million bpd, from the slightly revised (-0.1 million bpd) 2007 level of 86.0 million bpd," it said.

But it added that growing demand should be offset by an increase in OPEC capacity of one million barrels per day, to reach 35.4 million barrels a day, and a one-million barrel-a-day increase in non-OPEC supply to 51 million barrels a day.

Despite the words of reassurance it signalled again that OPEC should pump more crude, notably during the ongoing US summer driving season when many Americans take to their cars for their holidays.

It noted that US refineries are expected to increase production by 2.8 million barrels a day over the coming weeks as the holiday season comes to a close.

"We have been suggesting for some months that we think OPEC should boost supply in the second part of the year. The message is similar," David Fyfe, one of the IEA's main analysts said.

"If OPEC delays increasing supply to the market the current comfortable crude inventories could diminish."

Brent futures soared above 77 dollars per barrel in mid-July on tight fundamentals, geopolitical tensions and indications of strong fund buying, the IEA said.

Earlier this week Abdullah al-Badri, secretary general of the Organisation of Petroleum Exporting Countries, said OPEC did not plan to raise its oil output to ease the pressure on crude prices.

On Monday the IEA warned in a medium term forecast of increased tension on global oil markets after 2010 as spare capacity in the OPEC production cartel shrivels at a time when buoyant economic growth would be driving up demand.

Last month the IEA revised upward its forecast for world demand in 2007 to 86.1 million barrels. It revised the figure slightly down this month due to what it called minor baseline adjustments to OECD figures.

World oil supply in June fell by 550,000 barrels per day to 84.3 million barrels per day, as maintenance curbed North Sea production and seasonal factors limited North American output, it said.

OPEC saw crude supply down by 45,000 bpd on the month. The IEA said non-OPEC supply should rebound in July before maintenance again dents August output.

The IEA also expressed concern over supplies from Nigeria, which has lost capacity over the past 18 months due to political unrest and a wave of kidnappings in the Niger Delta.