Oil prices at five-year low as IEA cuts demand forecast

After closing at a five-year low Thursday, oil prices fell further Friday after the International Energy Agency lowered its forecast for global oil demand next year.

In its monthly oil report, the agency said global oil demand in 2015 will grow by 900,000 barrels a day — 230,000 less than previously forecast — to 93.3 million.

"While demand growth is still expected to gain momentum in 2015 from 2014, the acceleration is now looking more modest than previously foreseen, in line with the ever-more tentative pace of the global economic recovery," the IEA said.

Following its report, the benchmark New York oil price slipped further below $60 a barrel to fresh five-year lows. In late morning trading in London, it was 72 cents lower at $59.23. Brent, the international standard, was 74 cents lower at $62.94.

The IEA said several years of record high prices have "induced the root cause" of the rout in oil prices in recent months — the surge in non-OPEC supply to its highest growth ever and a contraction in demand growth to five-year lows. The fall in oil prices gathered pace in late November when OPEC left its output target unchanged.

The agency also dampened expectations that the fall in oil prices will automatically be a boon for the global economy.

"The adverse impact of the oil price rout on oil-exporting economies looks likely to offset, if not exceed, the stimulus it could provide for oil-importing countries against a backdrop of weak economic growth and low inflation," the IEA said.

It highlighted the impact on Russia, which has been particularly hard hit by the market sell-off.

"[A]round the world the dramatically lower prices are having an adverse affect on the economies of oil producing countries from Russia to Iraq," the Monitor's Ken Kaplan wrote Friday, "with some analysts saying even that the decline in the purchasing power of the ruble and living standards in Russia could pose a political peril for President Vladimir Putin."