June 18 (Bloomberg) -- The International Energy Agency is seeking an immediate increase in oil output at this weekend's producer-consumer summit in Saudi Arabia to ``calm markets'' in the wake of record crude prices.

``The main message that will be very good is if we see an increase in production now,'' Fatih Birol, chief economist at the IEA, said today in an interview in Istanbul. Oil producers should also agree ``to increase spare capacity for the next years to come. This is what the markets need to hear.''

Saudi Arabia, the world's largest oil exporter, is hosting a June 22 meeting in Jeddah with consumers and oil companies to discuss how to stabilize prices. Saudi Arabia will increase oil output by 200,000 barrels a day next month, King Abdullah told United Nations Secretary-General Ban Ki-Moon on June 15, according to a UN spokesman.

``It's difficult to assess exactly how much output must be increased, but in order to calm down the markets, the more the better,'' Birol said.

Oil prices have doubled over the past year and reached a record $139.89 a barrel in New York on June 16. The Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world's oil, has rejected calls to increase output in the past, blaming high prices on a weakening U.S. dollar and political tensions, rather than a shortage of supply.

Demand Forecast

``The very step that Saudi Arabia asked for this meeting is an encouraging one,'' said Birol. ``We hope all participants will give a good message for the markets.''

The Paris-based IEA, which advises 27 oil-importing nations on energy policy, expects global oil demand to increase by 800,000 barrels a day in 2008, compared with growth of 1 million barrels a day last year, Birol said.

Prices are unlikely to move ``substantially downwards'' in the coming years, because of increased costs of production, Birol said. ``They may go down, but the substantial lower levels that we saw a few years ago --$20 or $50 a barrel -- those days are over,'' he said.

Political upheaval or natural disasters in oil-producing countries may ``seriously pull prices higher,'' Birol also said. If prices stay at current levels, alternatives to oil will become more economical and demand for oil in the long term may decrease, he said. ``But at this time, oil producers are earning serious revenue.''

To contact the reporter on this story: Ayla Jean Yackley in Istanbul at ayackley@bloomberg.net.

Last Updated: June 18, 2008 06:33 EDT