Oil supply will exceed demand by more than one million barrels a day next year, according to the latest forecast by the International Energy Agency.
That amounts to a glut of around 1% of global output even with recent capacity reductions by major oil producers.
Weak demand in China, worries over US inflation and a rising value of the dollar are all having an impact said the agency.
“China’s marked slowdown has been the main drag on demand,” the IEA said.
“Rapid deployment of clean energy technologies is also increasingly displacing oil in transport and power generation, adding downward pressure to otherwise weak demand drivers.”
Edmund King, AA president, said: “If IEA predictions are correct, we could see pump price reductions in the new year due to a glut of oil.”
Brent crude today was up 0.5% at US$72.65.