Crude oil prices hit fresh seven-year lows on Friday as the International Energy Agency warned that global oversupply could worsen in the New Year.
The IEA, which advises developed nations on energy, also said in its monthly report that demand growth was starting to slow.
Brent fell below 39 dollars a barrel for the first time since December 2008, while West Texas Intermediate (WTI) US crude futures hit their lowest since February 2009.
The IEA says consumption is likely to have peaked in the third quarter, and demand growth should peak at 1.2 million barrels a day next year as the effect of sharply falling oil prices will wear off.
“2016 demand will be weaker and at the same time we may well see Iran come to the market if the sanctions are lifted. I see very few reasons why we can see growth in the prices. I think 2016 will be a year where we have a lower price environment,” said Fatih Birol, Executive Director of the International Energy Agency.
Goldman Sachs and others have suggested that oil prices could plunge to as low as 20 dollars a barrel as capacity to store unwanted oil might run out.
The IEA says “concerns about reaching storage capacity limits appear to be overblown”.
But the agency adds there is “evidence the Saudi-led strategy is starting to work”, referring to OPEC’s decision to maintain output to defend market share.