The week saw oil prices tumble on the back of higher inventories and weakness in the USA equity market.
Emerging economies are grappling not only with higher energy prices, but they are also seeing their currencies depreciate against the US dollar, which increases the threat of economic growth slowing down, the IEA said. The global economy is also at risk from trade disputes.
Crude oil prices had drifted lower earlier this week amid concerns about excess supply in the market. The revision also reflected changes in the way the agency assesses Chinese consumption.
The price of global benchmark Brent crude has risen from around $45 a barrel in June 2017 and peaked at over $85 this month on bullish bets by speculators.
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OPEC member-states and non-OPEC oil producing nations including Russian Federation entered into an agreement on reduction of oil production (the OPEC+ agreement) in late 2016. At the same time, total USA supply has increased by 390 kb/d. But now that crude is near the highest in four years, it's suddenly a hot topic. Official statements from Saudi Arabia suggest that October exports are back to the high levels seen in June and that more oil is available for those who wish to buy it. The rapid increase in prices was more about perception of a supply shortage than real fundamentals, he said.
The IEA report is the latest government assessment to predict weaker demand ahead and conclude that supply is adequate.
Crude prices dropped by the largest amount since July this week, decreasing by an average of 4-5% week-on-week despite a moderate rebound on Friday as the IEA alleviated concerns that the market will not be able to compensate for disappearing Iranian volumes.
The increase is the biggest weekly gain since mid-August. Recent production increases come at the expense of spare capacity, which is already down to only 2% of global demand, with further reductions likely to come.
"This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy", the Paris-based IEA said.