* Supply pressures to decrease this year
* Surge in Iraq pushes up OPEC output
* U.S. and Canada to drive non-OPEC production (Adds comment, detail; paragraphs 3, 10-21)
By David Sheppard and Christopher Johnson
LONDON, March 14 (Reuters) - A surge in supply from Iraq and other oil producers should be more than sufficient to meet growing demand this year, reducing pressure on markets despite rising international tensions, the West's energy watchdog said on Friday.
"While international tensions may be on the rise, pressure on oil markets ... seems set to ease," the International Energy Agency (IEA) said in its monthly oil market report.
Oil prices briefly spiked at the beginning of March after Russia took control of Ukraine's Crimea region. The United States announced a small 5 million barrel test release of its Strategic Petroleum Reserve this week as Washington and the European Union threaten sanctions against Russia.
The Paris-based agency, which advises most of the largest energy-consuming countries on energy policy, said Iraq's oil production surged by 530,000 barrels per day (bpd) in February to 3.62 million bpd, the highest since 1979.
Completion of infrastructure projects in Iraq's southern oil producing region allowed an increase in the country's exports to 2.8 million bpd last month, up 572,000 bpd.
Saudi oil output also rose last month, up 90,000 bpd to 9.85 million bpd, helping outweigh another drop in Libyan oil output and bringing total supply from the Organization of the Petroleum Exporting Countries to 30.49 million bpd, up 500,000 bpd.
Iranian oil exports, including condensates, peaked at a one-year high of 1.41 million bpd in January and February, the IEA said, up from an average of 1.1 million bpd in 2013.
The extra supply was partly a response to a very cold winter across North America, which led to a big draw in commercial oil inventories in the developed world.
The IEA said sharp drawdowns in oil stocks in the fourth quarter of last year continued into January but were now easing.
"Even though OECD stocks plummeted over the winter, we believe that was a one-off caused by very cold weather in the United States," Antoine Halff, head of the IEA's oil industry and markets division, told Reuters.
"While oil markets have been a little nervous because of tensions between the West and Russia, most market participants understand how deeply entwined their energy trade is, and don't expect any disruption to oil supplies."
While Ukraine is a major gas corridor between Russia and Europe, Russian oil exports largely bypass the country.
SUPPLY AND DEMAND
The IEA increased its forecast for global oil demand growth from last month's report by 50,000 bpd to 1.35 million bpd, arguing the global economy was gaining momentum.
The view of higher oil demand growth from the IEA was in line with the Organization of the Petroleum Exporting Countries (OPEC), which also increased its demand forecast in its monthly report on Wednesday.
While the U.S. Energy Information Administration trimmed its growth outlook this week, all three major forecasters now see global oil demand growth at between 1.1 million to 1.4 million bpd in 2014.
The IEA said, however, that growth in China had slowed, reflecting "weaker underlying economic growth".
Global markets have been rattled this week by signs of slowing growth in China, the world's second largest economy.
China's crude demand is still expected to increase by 344,000 bpd to 10.4 million bpd this year, the IEA said, accounting for a quarter of global oil consumption growth.
Supply growth looks robust, with fast-growing production in the United States and Canada expected to drive the biggest increase in oil output from countries outside OPEC since the 1990s, with Russia, China and Brazil also contributing.
Total non-OPEC supplies will increase by 1.7 million bpd in 2014, the IEA said, and adding to a 1.3 million bpd increase last year.
"There are reasons to be optimistic about supply and demand balances going forward," Halff at the IEA said.
The IEA increased its projection for the need for OPEC crude by 100,000 bpd to 29.7 million bpd, a level below the group's current output. (Reporting by Christopher Johnson and David Sheppard; editing by William Hardy and Keiron Henderson)
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