However, the bad news for the big oil producers like OPEC, is that global supply remains strong and the lower prices are unlikely to significantly dent production until next year.
The IEA’s August Oil Market Report found, "the supply overhang - the difference between global supply and demand - has persisted and reached a staggering 3 million barrels per day in the second half of 2105, the widest gap in 17 years, as ever-higher flows of oil hit world markets."
However, the IEA revised up its growth forecast for oil demand by 14 per cent - or 200,000 barrels a day - to 1.6 million barrels a day this year.
Oil supply fell by 600,000 barrels a day in July, mainly due to production declines in non-OPEC nations.
OPEC production remained steady at three-year highs.
The IEA report argued, as lower prices and spending cuts take a toll, non-OPEC supply growth is expected to slow sharply from a 2014 record of 2.4 million barrels a day to 1.1 million barrels a day this year. "Our latest forecast shows stronger-than-anticipated demand and non-OPEC supply growth swinging into contraction next year," the IEA said.
"On the other side of the equation, global supply continues to grow at a breakneck pace - currently running 2.7 million barrels a day above a year earlier - despite a collapse in oil prices.
"While a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016 - suggesting global inventories will pile up further."
However, the IEA outlook does not include potentially higher Iranian output in the case of sanctions being lifted. - abc news
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