With prices in both the key US and European markets tumbling to seven-year lows — below $US40 a barrel — the International Energy Agency (IEA) said the first signs of slowdown in demand growth are starting to appear.
The analysis dragged both Brent Crude and West Texas Intermediate prices down by as much as 5 per cent overnight.
Both commodities have fallen by more than 10 per cent over the week since unity among OPEC members finally collapsed, leading to fears that Gulf producers would continue to raise production, no matter the price.
Brent futures slipped below $US38 a barrel for the first time since December 2008 while WTI fell below $US35 a barrel and is rapidly approaching its GFC low of $US32.40.
In its monthly Oil Market Report, the Paris-based IEA, the key energy advisor to the OECD, found a nine-month long rally of strong demand growth for oil in the US came to an abrupt halt in September.
"Preliminary indicators for October and November [are] pointing to further outright declines," the IEA said.
"Rapid gains in OECD oil demand growth may be on the verge of a sharp deceleration if the latest preliminary indicators of US, German, French and Japanese deliveries can be used as a ‘canary in the mine’."
While demand shows signs of crumbling, the same can’t be said of the OPEC producers’ determination to keep their taps open.
In what the IEA described as an "unrelenting oversupply", supplies are gushing out at 1.8 million barrels a day (mb/d) more than a year ago.
OPEC has effectively been "pumping at will" since Saudi Arabia convinced fellow cartel members a year ago to refrain from supply cuts and defend market share against the rapidly growing production in US shale oil fields and Russia.
Saudi Arabia’s decision earlier this month to abandon OPEC’s 30mb/d supply ceiling — a cap that had been roundly ignored anyway — signalled a renewed determination to pump non-OPEC producers out of business.
- abc news