LONDON, Oct 25(Reuters) - China's thirst for oil will squeeze prices higherand
destroy demand in developed economies if worldoil supply growth does not exceed
current trends, said senior commodity fundmanagers who did not expect fast oil output
rises in Libya andIraq.
"In the last 12 months China's demand for diesel forpower generation has been one of
the major drivers (of the market)," Tony Hall,chief investment officer of the Duet
Commodities Fund, said at a conference inLondon on Tuesday. "They do tend to step in and
stockpile," hesaid.
Hall did not see anyprospect of the much-debated economic "hard landing" in China and said supply would not be able to keep pacewith the fast-expanding economy's need for oil.
"We are not seeing anysignificant squeezes yet but this is a supply side story - if wecarry
on with this current trend we will havesome problems in the light, sweet products," hesaid.
He highlighted a projection of global oil demand growthof 1.4 million barrels per day for
next year. "I don't believe supply can keeppace."
Hall's comments were supported by Todd Gross, chiefinvestment officer of Hudson
Capital Group, whichruns an energy-focused fund.
With spare capacity at just two million barrels per day,he saw little slack in the system.
"That's a criticallevel," said Gross. He argued that Iraq's production increases would
have to accelerate tomake sure the market was balanced.
"It's likely that prices will just go higher and rationdemand at some point, largely in the
OECD (Organisation forEconomic Co-operation and Development) countries."
Michael Rothman, president of Cornerstone Analytics, aresearch firm, said oil is used
differently today thanin the 1970s, when some 30 percent of the barrel went intoheating
and power and it was relatively simple tosubstitute oil with coal or gas.
Now transport is a much bigger part of the barrel andthere are few alternative fuels.
As a result, a much higher oil price will berequired to ration demand, and that d