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The world will have to live with lofty oil prices for at least the next two years due to a combination of strong demand and supply constraints, Rodrigo Rato, the managing director of the International Monetary Fund (news - web sites), said on Saturday.
The world economy enjoyed its strongest growth in 30 years in 2004 despite the spike in oil prices and Rato said he expected growth of more than 4 percent again this year.
But he said growth could be hit if oil stayed at current levels or climbed even higher and urged oil-producing countries to be more receptive to private-sector investment.
The Organization of Petroleum Exporting Countries (OPEC (news - web sites)) on Wednesday announced an immediate 500,000 barrel per day (bpd) increase in output, with another half a million bpd to come should prices fail to ease. Top producer Saudi Arabia said the extra oil was meant to ward off an end-2005 supply crunch.
But with output already near a 25-year high, the group is stretched to meet demand growth. Other major exporters Russia and Norway also cannot add significantly to this year's supply.