LONDON ø Gulf Cooperation Council states were being urged to increase their crude oil capacity to compensate for the failure of Iraq to return as a leading energy exporter.

A report by the London-based Center for Global Energy Studies warned that GCC states must bolster their oil output to stabilize prices amid the Al Qaida insurgency in Saudi Arabia and Sunni attacks on Iraqi oil facilities.

Without a major GCC oil increase, the international energy market could be damaged.

"After years of lackluster oil demand growth, with OPEC needing to keep a tight rein on supply to maintain prices, the balance appears to have shifted, with the organization now required to boost output to prevent prices from rising to levels that would choke off future demand growth," the energy center said. "The world has not seen the kind of demand increase we are presently experiencing since 1976."

The center said OPEC has not kept up with the increase in demand because of limited capacity. The report said the organization has underestimated the strength of the oil market in 2004 and that OPEC's spare production capacity will be quickly filled.