The global oil glut that has hammered prices and the budgets of many producer nations will persist into 2017, as demand growth slows more than expected and Opec keeps its taps wide open, the world’s leading energy body warned on Tuesday.

Weakening demand growth in China and India and near record output from Opec producers had offset steep declines in the rest of the world, the International Energy Agency flagged in its widely followed monthly report.

“This supply-demand dynamic may not change significantly in the coming months,” the Paris-based group said. “Supply will continue to outpace demand at least through the first half of next year.”

The IEA joins a growing list of energy bodies predicting a more drawn out recovery from the worst price rout in a generation, and its report will put further pressure on big producers to agree a deal to cap or freeze output.

Earlier this week Opec’s forecasting arm warned the market would remain oversupplied well into next year, citing the resilience of the US shale industry to lower prices and new streams of oil production coming on stream.

“Today’s IEA report is more bearish than last month’s,” said Clint Oswald, analyst at Bernstein Research. The agency had previously forecast a hefty reduction in oil stockpiles in the third quarter that would help ease the oil surplus that has weighed on prices since the middle of 2014.

But in its latest report the IEA said crude inventories in industrialised nations had “smashed through” the 3.1bn barrels mark reported in July to levels “never seen before”, as crude processed by refiners grew at its lowest rate in a decade.

“As for the market’s return to balance – it looks like we may have to wait a while longer,” it said.

Brent crude, the global benchmark, fell as much as 2.4 per cent after the release of the report to $47.15. The US marker, West Texas Intermediate, fell almost 3 per cent to $44.94 in late afternoon trading.

Almost two years since Opec embarked upon a strategy of not restricting output to put pressure on higher cost rivals such as US shale, the market remains awash with crude. The cartel’s own production, analysts say, is a big contributor to current prices that have fallen by more than half since mid-2014. On Tuesday, Brent crude was trading at just over $47 a barrel.

Oil output from Opec kingpin Saudi Arabia held near an all-time high in August — around 10.65m b/d — allowing it to overtake the US for the first time since 2014 to become the world’s largest oil producer, the IEA said.

Some of the kingdom’s rivals have made renewed attempts for coordinated action to curb further output increases among Opec members and those outside the cartel. The world’s biggest producer countries plan to meet later this month in Algeria, with the latest estimates from the IEA and other energy bodies likely to add urgency to the talks.

“With the price of oil at current levels, one would expect supply to contract and demand to grow strongly. However, the opposite now seems to be happening,” the IEA said.

Olivier Jakob at energy consultancy Petromatrix, however, said the IEA data suggests “an OPEC ‘freeze’ will not be enough to rebalance the market in 2017.”

The oil slump at first encouraged crude buying from Asia’s big consumer countries. But this has now dramatically decelerated and “the stimulus from cheaper fuel is fading,” the IEA said. Economic anxieties in developing countries have further added to the weakness.

As a result, the IEA’s global oil demand growth has been revised lower for 2016 by 100,000 barrels a day to 1.3m b/d due to severe weakness in the third quarter. The IEA forecasts momentum to ease further to 1.2m b/d in 2017.

On the supply side, near record output from Opec countries has helped to offset steep cutbacks from producers outside the cartel. At 96.9m b/d in August, global oil output was just 300,000 b/d below the level a year ago.

Opec crude oil output edged up 30,000 b/d in August to 33.47 b/d, testing a record rate, as Middle East producers unleashed more crude on the market. Opec supplies are almost 1m b/d above those a year ago. Aside from Saudi Arabia, neighbouring Kuwait and the UAE also hit their highest output while Iraq raised supplies. Iran too has reached a post-sanctions high.

Non-Opec oil production fell by 300,000 b/d in August to 56.4m b/d on weaker output from the US, Russia, Kazakhstan and the North Sea, the IEA said.

Investment and rig cuts amid lower oil prices are expected to drive a 840,000 b/d output decline this year, but production from non-Opec countries will return to growth in 2017 and rise by 380,000 b/d.

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