A think tank has warned that oil prices could hit $200 a barrel because of a supply "crunch" in five years time.

Chatham House said incessant demand combined with inadequate investment by oil companies in raising output - rather than dwindling supplies underground - risked driving up prices to more than two-thirds current levels.

A senior research fellow at the think tank said a crunch was likely "even allowing for some increase in capacity over the next few years".

He added: "The implication is that it will quickly translate into a price spike although there is a question over how strategic stocks might be used to alleviate this."

The report came as oil prices dipped to just over $117 down nearly $30 in the past month amid mounting concern that slower economic growth is reducing global demand.

Light, sweet crude traded on the New York Mercantile Exchange, the world's benchmark oil price, reached $117.23 at one point before rising back up nearly a dollar. Brent crude was trading even lower at around the $116 mark.

Earlier this year Chakib Khelil, president of oil producing cartel Opec, warned that a major market crisis, such as production stopping in Iran, could see prices rise to $200 or more.

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