Oil prices tumbled Tuesday after the International Energy Agency warned that global demand for oil is growing slower than it previously thought.
"Demand growth is slowing at a faster pace than initially predicted," the Paris-based agency said as it cut its forecast demand increase for 2016 by 100,000 barrels a day to 1.3 million barrels, and its 2017 growth forecast by 200,000 barrels per day to 1.2 million barrels.
"Recent pillars of demand growth - China and India - are wobbling," the IEA wrote in a note. "After more than a year with oil hovering around $50 a barrel, the [economic] stimulus from cheaper fuel is fading."
Oil prices were down sharply Tuesday. Brent Crude traded at $47.36, down $0.96 or almost 2%, while the key U.S. benchmark of West Texas Intermediate fell to $45.22, down $1.07 or 2.3%.
The new forecasts will add to pressure on OPEC countries to curb production increases when they meet later this month in Algeria. Saudi Arabia, the cartel's biggest producer, and its economic and political rival Iran have been sparing over the possibility of a so-called "production freeze", which would cap output at current levels.
Analsysts, including Goldman Sachs, have warned that such a freeze would not be enough to boost oil prices, noting that current output will continue to outweigh demand into 2017.
Those predictions were give credent by the IEA, which noted on Tuesday that OPEC output of 33.47 million barrels per day in August was close to all time records.
"Kuwait and UAE hit their highest output ever and Iraq lifted supplies," noted the IEA. "Output from Saudi Arabia held near a record, while Iran reached a post-sanctions high. Overall OPEC supply stood 930,000 barrels a day above a year ago."
Global output in August fell by 300,000 barrels per day to 96.9 million barrels, dragged lower by a sharp decline in production amongst non-OPEC countries. Those countries, including Russia and the U.S., are expected to pump about 840,000 fewer barrels per day in 2016 than in 2015. That decline is expected to reverse in 2017, when the IEA predicts that non-OPEC output will grow about by 380,000 barrels per day on its current level.
The IEA is an independent advisory group funded by 29 member countries that are net oil importers.