OIL supply from the United States, Russia and other countries outside of OPEC is expected to drop sharply next year — possibly the steepest decline since the Soviet Union collapsed — because of low prices, the International Energy Agency forecast Friday.

    In its latest monthly report, the IEA says non-OPEC production is expected to drop nearly half a million barrels to 57.7 million barrels a day in 2016. But a prominent investment firm questions whether even a cut that steep will shrink the glut of oil on the market enough to boost the price.

    Amid booming U.S. production and high OPEC output, the benchmark price of oil plunged from over US$100 last year to about US$45 last week. Global oil demand has grown, but at a slower pace, and analysts have said big production cuts are needed to balance the market.

    Producers in the United States, who need a higher price per barrel than OPEC countries to break even, have started to cut back. The U.S. Energy Department estimated last week that production fell by 140,000 barrels per day in August. The decline is expected to widen in the coming months, and production should average 400,000 barrels a day less in 2016 than in 2015.

    Russian and North Sea supply will shrink in 2016, according to the IEA. Overall, non-OPEC production should drop the most since 1992, when non-OPEC output shrank 1 million barrels after the USSR fell apart.

    Low oil prices are also sparking an increase in demand, IEA said. With pump prices well below US$3 a gallon in most states, gasoline demand in the United States is at an eight-year high. The agency said demand in China is still growing.

    (SD-Agencies)