In its oil market report for December released yesterday, the IEA slashed oil demand growth for 2015 by 230,000 barrels per day (bpd) to 0.9 million barrels per day (mbpd). The global demand is now estimated to grow 1 per cent to 93.3 mbpd next year from 92.4 mbpd in 2014.
Paris-based IEA, established under the Organisation for Economic Co-operation and Development (OECD) is an energy adviser to 29 industrialised nations.
Oil prices have nosedived in recent months due to weak demand growth and North American shale oil boom.
Nymex crude price has plunged 46 per cent from its June high of $107 a barrel to $57.81 a barrel yesterday.
The main cause of fall in prices is "a surge in non-OPEC supply to its highest growth ever and contraction in demand growth to five-year lows," IEA said. It is expected that non-OPEC supply gains would add to a global oil glut.
According to IEA, supplies from non-OPEC countries would be bigger next year, which could reach 57.8 mbpd, up by 1.3 mbpd. For the current year, non-OPEC production is estimated to rise by a record 1.9 mpbd.
Global crude production fell by 340,000 bpd in November to 94.1 mbpd, while supplies from oil cartel Organisation of Petroleum Exporting Countries (OPEC) declined 315,000 bpd during the month to 30.32 mbpd.
Most of the cut in production is related to Russia, which is struggling from both oil price slump and economic sanctions imposed by western countries due to the country's involvement in the conflict in Ukraine.
The Russian rouble fell to an all-time low of 57 to the US dollar yesterday and euro is traded at around 71 roubles. The Russian currency has lost over 42 per cent of its value against the dollar since January.
The country's economy is poised to post a 0.7-per cent contraction next year, according to World Bank.
Two days ago, OPEC slashed its 2015 oil production forecast to 28.9 mbpd, down by 300,000 bpd compared to its previous prediction, and also a 12-year low.
It is about 1.1 mbpd lower than the 12-member cartel's target of 30 mbpd agreed a fortnight. According to Bloomberg data, current oil prices are too low for 10 out of OPEC's 12 members to cover even their national budgets, the exceptions being Kuwait and Qatar.
Analysts continued their downward revision of oil price forecasts. ANZ Research yesterday cut its forecast by around 24 per cent in 2015 and now expects an average price of $68 a barrel for Nymex crude and $71 a barrel for Brent crude in 2015.
''Despite lower crude oil prices, we expect U.S. production to continue to grow apace in 2015,'' expanding by 685,000 barrels a day, the IEA said.
For the current year, IEA kept the global demand growth unchanged at 700,000 bpd.
Global oil inventories are expected to rise by 297 million barrels in the first half of 2015. Production rising faster than demand could strain some nations' ability to store oil by the middle of next year, IEA predicted.
''Barring a disorderly production response, it may well take some time for supply and demand to respond to the price rout,'' the IEA report said.
