The IEA chopped its forecasts for global oil demand growth in 2016 and 2017 by 100,000 barrels and 200,000 barrels respectively.
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“As a result, supply will continue to outpace demand at least through the first half of next year”, it said. Oil declined as the International Energy Agency changed its view on the global oversupply, seeing a glut persisting into 2017.
Traders are awaiting a meeting this month of key producer Russian Federation and the Opec exporters club to address a global supply glut and overproduction crisis that has battered prices for the past two years.
Crude prices have been see-sawing between $40 and $50 a barrel for months, given the limited action by major oil states to rein in output.
Global oil supply was down by 0.3 million barrels a day in August as non-OPEC production was down by 0.3 million barrels per day vs. a 2015.
Russian officials are due to join an informal OPEC meeting this month at which producing countries have suggested officials may discuss limiting production to stabilize world prices.
“With the price of oil at current levels, one would expect supply to contract and demand to grow strongly”, it said.
IEA noted that China and India – key drivers of this summer’s demand growth – were “wobbling”, while a slowdown in the U.S. and economic concerns in developing countries had also contributed to the surprise development.
OPEC revised up its 2016 and 2017 non-OPEC supply forecasts, citing factors including the start-up of Kazakhstan’s Kashagan oilfield and a lower-than-expected decline in U.S. shale output, and said the immediate outlook was for more production.
London Brent crude for November delivery LCOc1 was down 49 cents, or 1.0 per cent, at $US47.52 ($F97.78) a barrel by 2246 GMT (6.46pm ET) on Sunday after settling down 4 per cent last Friday.
“People are seeing that rally we had on a very big decline in [US] inventories last week is a bit of a selling opportunity”, said CMC Market chief market analyst Ric Spooner.
Crude futures were also supported by near-term projections for a more balanced market, a weaker dollar and draws in crude and gasoline stocks in the U.S, OPEC said.
Trading was fairly thin on Friday, and analysts and traders kept debating how effective a deal would be to limit supply should OPEC and non-OPEC producers agree when they meet informally in Algeria on September 26-28.
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Saudi Arabia has overtaken the United States as the world’s largest oil producer – when non-crude forms like natural-gas liquids are included – a ranking America held since April 2014.
