NEW YORK, May 20: A modest easing in oil demand due to higher prices should keep crude oil inventories rising in the United States and elsewhere for some months, Federal Reserve Chairman Alan Greenspan said on Friday. Speaking to the Economic Club of New York, Greenspan noted that he had predicted in April, when prices were spiking, that he expected to see “an inventory buffer to damp the price frenzy.”

Since then, inventories have grown to the point where US crude oil stockpiles are near a six-year high, according to a government report issued this week.

“A somewhat lesser, but still important, accumulation of crude oil is evident in other major countries,” Greenspan said. “Inventory accumulation is likely to continue unless demand rises, output declines, or we run out of storage capacity.”

Substantial portions of Greenspan’s remarks mirrored a speech he delivered on April 5 to an oil refiners’ group in Texas. He noted that higher prices in recent months had slowed the growth of oil demand, “but only modestly.” Still, it was making markets absorb a gain up in inventories and prices have eased since then.

Looking further ahead, Greenspan said the magnitude of energy consumption can have significant impact on how the US economy performs in coming years. He added that the increasing use of less gas-thirsty cars on US roads was of critical importance for increased fuel efficiency.

Greenspan said that China and other emerging Asian countries were trying to become more efficient, but they lag Western nations, and to some extent may offset conservation efforts elsewhere.

CHINA CURRENCY PEG: The Fed chief said that China was facing significant pressure from its financial system to revalue the yuan currency but that this would not necessarily cut the US trade gap.—Reuters