Oil supply from countries outside the Organization of the Petroleum Exporting Countries is likely to see its biggest drop in more than two decades next year following a recent fall in crude prices, the International Energy Agency said on Friday.
According to the IEA's latest monthly market report, oil production from non-OPEC members such as the U.S. and Russia is expected to fall by almost 0.5 million barrels a day.
Oil prices hit their lowest level in six years last month amid concerns about oversupply and the outlook for the world economy as China's growth slows.
Brent crude oil prices were trading at $48.36 a barrel in early Europe trade Friday; having fallen almost 25 percent so far this year. They have halved in value in the past year.
U.S. crude prices were down 1.4 percent to $45.26 a barrel, having tumbled about 23 percent since the start of the year.
"The big story this month is one of tightening supply, with the spotlight firmly fixed on non-OPEC," said the IEA, founded in 1974 to help countries co-ordinate a collective response to major oil-supply disruptions.
"Oil's price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea, which may result in the loss next year of half a million barrels a day – the biggest decline in 24 years," the group said in a note.
Unnerved
While the recent volatility in oil has been "unnerving," the IEA said the fall in oil prices "is forcing the market to behave as it should by shutting in output and coaxing demand."
And the oil rout has prompted many analysts to revise down their forecasts for the commodity also referred to as "black gold."
Goldman Sachs on Friday cut its 2016 forecast for Brent crude to $49.50 from an earlier forecast of $62. Swiss bank UBS this week cut its oil-price forecast for the period 2015-19, lowering its long-term estimate for oil prices to $80 a barrel from $90.
The IEA said it expected U.S. oil production to bear the brunt of a decline in oil prices.
"After expanding by a record 1.7 million barrels a day in 2014, the latest price rout could stop U.S. growth in its tracks," the IEA said. "A sharp decline is already underway, with annual gains shrinking from more than 1 million barrels a day at the start of 2015 to roughly half that level by July."
At the pump
The IEA added lower oil prices were helping boost demand for oil. It said global oil demand is expected to reach a five-year high of 1.7 million barrels a day this year, before moderating to 1.4 million barrels in 2016, which would still be above trend.