Oil supply from countries outside the Organization of 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.
According to IEA's latest monthly market report, oil production from non-OPEC members such as the United States and Russia is expected to fall by almost 500,000 barrels a day to 57.7 million in 2016, CNBC reported.
The decline in total non-OPEC supply next year will be the biggest since a drop of 1 million barrels a day in 1992 following the collapse of the Soviet Union, it said.
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.
Crude futures fell around 2% on Friday after influential Wall Street trader Goldman Sachs cut its outlook on oil, but positive sentiment from rebounding US stock prices and less drilling for oil helped the market pare losses.
Goldman lowered its 2016 forecast for US crude to $45 a barrel from $57 previously, and Brent to $49.50 from $62, citing oversupply and concerns over China's economy.
Germany's Commerzbank also cut its oil outlook, joining a long list of banks that have downgraded crude price projections on supply glut concerns.
"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 coordinate 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.
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. IEA said it expected US 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 US 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."
IEA added that 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.
"US motorists are taking to the roads, propelling domestic gasoline demand to an eight-year high." IEA said.
It expected China, the world's second largest oil consumer, to keep up its crude purchases despite the recent stock market collapse, currency devaluation and weak economic data.
Pain for OPEC
Despite the sharp fall in oil prices, OPEC and non-OPEC producers have refused to cut oil production to defend their market share. Russia's Deputy Prime Minister Arkady Dvorkovich said last week that the country would not cut oil production, saying that if oil prices are low enough for a long period of time, supply would go down in a "natural way".
IEA said lower oil prices were hurting OPEC members as well as producers outside the group, with high-cost projects in OPEC states at risk.
"The 12-member group, meanwhile, continues to pump vigorously, with Saudi Arabia, Iraq and the UAE producing at or near record rates," IEA said.
"On the face of it, the Saudi-led OPEC strategy to defend market share regardless of price appears to be having the intended effect of driving out costly, 'inefficient' production."
