Sept. 6 (Bloomberg) -- Supply in the world's oil market is tightening, the new head of the International Energy Agency said in an interview, one day after he met with the secretary general of the Organization of Petroleum Exporting Countries.

``The market situation is tightening, we know that,'' Nobuo Tanaka, executive director of the agency that advises 26 oil- consuming nations, said in Paris today. ``The current level of spare capacity is very low.''

The IEA has previously urged OPEC not to restrict oil supplies. OPEC members, who pump about 40 percent of the world's oil, meet on Sept. 11 in Vienna to review production targets.

Tanaka met with OPEC Secretary-General Abdalla El-Badri yesterday in Vienna. The IEA head declined to say whether OPEC oil production is enough, saying ``the answer is in the market.''

Crude oil futures traded in New York have risen 26 percent so far this year to $76.68 a barrel.

The world market has sufficient amounts of oil, OPEC President Mohamed Dhaen al-Hamli said in an interview today.

``At the moment the market is adequately supplied,'' he said in Dalian, China, when asked if OPEC will raise output at its forthcoming meeting. ``If there is a need we are happy to talk about the availability.''

Following their meeting in Vienna yesterday, Tanaka said El- Badri raised concerns about the fallout of the subprime crisis on the U.S. economy.

Consumer Confidence

``That is a concern and it is legitimate,'' he said. ``We don't know what the subprime impact will be on the U.S. economy. It could have an impact on consumer confidence. It's one element they are thinking about.''

Tanaka declined to comment on current oil prices, saying only, ``If prices are too high, it's bad for the economy. Economic downturn creates serious problems. OPEC understands this.''

Moves by countries such as Russia and Venezuela to take control of oil exploration and development from foreign oil companies isn't a worry, but could create investment bottlenecks in the future, Tanaka said.

``If countries use profit from oil for something else rather than investing in the industry, that could create serious shortages in upstream and downstream industries in the future and that is a concern,'' he said. ``In the mid and the long term we will need more capacity and investment.''

IEA Welcomes China

Tanaka said he would be keen to welcome China and India as IEA members should they wish to join. Developing closer ``linkages'' with the countries will be a priority because China will soon be the world's largest emitter of carbon dioxide and the two nations are key to global efforts to improve energy efficiency, he said.

India and the other countries of the 10-member Association of Southeast Asian Nations, or Asean, are interested in setting up emergency oil stockpiles, as China is doing, he said.

Tanaka became head of the energy agency Sept. 1 after running the science and technology division at the Organization for Economic Cooperation and Development in Paris, where he also had roles in trade negotiations.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

Last Updated: September 6, 2007 13:11 EDT