“The implementation of the ceiling would create strong upside risks to crude oil prices,” David Greely, head of energy research at Goldman in New York, said in a note. The Organization of Petroleum Exporting Countries is pumping 700,000 barrels a day above the target and will have to cut output as supplies increase from Iraq and Libya, he said.

OPEC set a new production ceiling for the first time in three years at its Dec. 14 meeting in Vienna. The agreement underscores how some OPEC members are concerned oil at about $100 a barrel may sap demand amid signs Europe’s debt crisis is driving the world toward a recession.

“Despite the notable slowdown in global economic growth, we continue to expect that oil demand will grow well in excess of production capacity growth,” Greely said. “It is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supply.”

Spot prices, particularly for Dubai crude, reflect a “tight” market in which oil demand is growing, Greely said. The premium of near-term Dubai crude to later contracts, a situation known as backwardation, is at the widest in 10 years, he said.

Brent crude for February delivery fell 25 cents, or 0.2 percent, to $103.35 a barrel on Dec. 16 on London’s ICE Futures Europe exchange.