Oil excess hits record high of 3bn barrels

According to the International Energy Agency (IEA), the pressure on oil prices is likely to extend into next year due to a record glut on the global market.

The latest monthly report from the IEA said that stockpiles now stand at a record three billion barrels. The news affected the European stock markets on Friday, with the FTSE 100 dropping by almost 1%.

More than halved

Oil prices have dropped by more than half over the last 18 months, with several factors playing a part, and the effects continue to ripple across the UK economy.

Increased shale oil output in the US, along with a continued refusal of the OPEC nations to cut production, has led to the current record breaking oversupply situation, pushing down prices even further.

Last Friday, Brent crude dropped nearly 1%, and US crude was down 2.8%.

Months to clear

US production is expected to fall next year, but even so, it will take months to clear the glut, according to the IEA

The agency said: "This massive cushion has inflated even as the global oil market adjusts to $50 per barrel. Demand growth has risen to a five-year high of nearly two million barrels per day."

"Gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply," it explained.

However, the IEA expects growth in global demand for oil to fall next year as lower prices become less of a novelty.