West Texas Intermediate for December delivery fell 68 cents to $55.02 a barrel at 10:41 a.m. on the New York Mercantile Exchange.
"The IEA slashing its oil demand growth forecast for this year and the next has dampened some of the bullish sentiment prevailing in the market", Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London.
The IEA estimates that USA crude oil is expected to rise until reaching a peak in the 2020s of about 17 million bpd.
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The IEA, which tracks the energy for 29 countries, said the United States - once reliant on imports - is becoming the "undisputed global oil and gas leader".
"The oil market faces a hard challenge in Q1 2018 with supply expected to exceed demand by 600,000 bpd followed by another, smaller surplus of 200,000 bpd in Q2 2018", the agency said.
Additionally, while U.S. production is expected to ramp up, IEA projects that global demand will decrease by 100k barrels per day in 2018 - ironically, due, in part, to warmer temperatures.
That will keep prices down and help make the USA a net exporter of oil - in addition to gas - by the late 2020s. On the supply side, rising U.S. output also pressured prices.
The US benchmark slipped 0.7 per cent yesterday as Russian Federation believes it's too early to announce a possible extension at Opec's meeting at the end of the month, according to two people with knowledge of the matter.
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Greg McKenna of futures brokerage AxiTrader said prices were dragged down as "current demand will fall and longer term the growth of USA oil production will eclipse anything we've seen before - including the Saudis and Russians".
The deal expires in March 2018 but Opec will meet on November 30 to discuss policy, and it is expected to agree an extension of the cuts.
Crude stockpiles climbed to about 459 million barrels last week and production extended gains to 9.65 million barrels a day, according to the EIA. "This is a continuation of the strong demand growth we are seeing in our short term oil market analysis", the report said.
The IEA said warmer temperatures could reduce consumption, while sharply rising output from some producer countries might bring back the global crude glut in the first half of 2018.
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