The IEA said in its monthly oil market report that the growth of the oil demand in markets is expected to slow to 1.2 million barrels per day (m/bpd) in 2017 from 1.4 m/bpd this year.  It had previously forecast growth of 1.3 m/bpd for 2017.

The IEA further said the demand for oil will reach 97.5 m/bpd next year after 96.3 m/bpd this year. 

It was said it was basing its projections on the International Monetary Fund's decision in July to cut its world economic growth forecast following Britain's vote to leave the EU the previous month, AFP reported.

"As a result the global outlook for 2016-17 has worsened," the IEA said. It added that Britain itself would suffer the most. The rest of the EU was also likely to be hit as trade prospects and confidence weakened, it warned. 

Nevertheless, the IEA said in its report that the oversupply of oil in markets, which has been weighing on the oil price since June, "will disappear in the latter part of 2016”.

"Our balances show essentially no oversupply during the second half of the year," it said.

The IEA’s report further emphasized that supplies to markets rose by around 0.8 m/bpd in July. This was a result of increased production by OPEC and producers outside the cartel rose, it said.

But while OPEC is providing the world with the fastest sources of supply growth it "is also notching up some of the biggest output losses", the IEA said.

It said OPEC’s production had been specifically hurt by the unrest in key producers Venezuela and Nigeria, where declines in production have partly offset production gains in Iraq and post-sanctions Iran.