Oil supply from the United States, Russia and other non-OPEC countries is expected to drop sharply next year — possibly the steepest decline since the Soviet Union collapsed — because of low prices, the International Energy Agency forecast Friday.
In its latest monthly report, the IEA says non-OPEC production is expected to drop nearly half a million barrels, to 57.7 million barrels a day. It said that would be the largest annual drop since 1992, when non-OPEC supply shrank 1 million barrels after the USSR fell apart.
Amid booming U.S. production and high OPEC output, the benchmark price of oil plunged from more than $100 per barrel last year to about $45 this week. Global oil demand has also grown, but not enough to absorb the high supply.
The agency forecast global oil demand would grow this year to a five-year high of 1.7 million barrels a day, before dropping to 1.4 million next year.
The low price is particularly hurting U.S. production, with the decline in output speeding up over the summer, the IEA said. Russian and North Sea supply is also forecast to shrink.
The report said OPEC supply remains higher than last year and well above the group's own production targets. There have been only slight declines in Saudi Arabia, Iraq and Angola, which edged down OPEC's daily crude supply by 220,000 barrels in August to 31.6 million barrels a day.
So despite the IEA's forecast for a drop in production in places like the U.S. next year, experts say it is unlikely that prices will rebound anytime soon.
The low prices are being seen at the pump. The average price for a gallon of gasoline in Indianapolis on Friday was $2.10, according to Gasbuddy.com. Numerous stations around the city were selling gas for less than $2 per gallon.
Analysts at Goldman Sachs slashed their forecasts for the U.S. benchmark price of oil for next year to $45 a barrel from $57 a barrel previously.
"The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016," the analysts wrote in a note to clients on Friday.