The largest energy agency on earth slashed its expectations of world demand for oil by 200,000 barrels per day on Tuesday, citing a slowing global economy.

The International Energy Agency now says it expects global demand for oil to be 92.4 million barrels per day this year. That number is likely to inch higher to 93.5 million barrels per day next year, but that too is about 300,000 barrels less than the agency was forecasting as recently as last month.

The demand figure for this year is the smallest growth the energy agency has forecast in five years.

Oil prices have fallen by more than 20 per cent since the start of the summer, a result of both reduced demand and increased supply.

Indeed, demand would probably be even lower were it not for booming supply, which has driven down prices. The U.S. recently passed Saudi Arabia in terms of oil production, the first time that's been the case since 1973. Even as America's shale output is growing exponentially, OPEC nations — which used to be able to pretty much set the oil price by tinkering with output — have had to step up production in order to maintain revenues.

OPEC oil output rose by 415,000 barrels per day in the month to 30.6 million barrels. That's the highest it's been in more than a year as formerly shuttered production in Iraq and Libya comes back online.

"We should not expect OPEC to necessarily play its traditional role of swing producer," the IEA's senior analyst Antoine Halff told Reuters.

The oil body is supposed to meet at the end of November to discuss what it can do to stem the tide of lower prices. But some OPEC nations (like Qatar and Saudi Arabia) can afford to wait out cheap oil a lot longer than higher-cost areas like Iran, Nigeria and Angola.

All that oil is taking supply and demand to a virtual dead heat. Total oil output for the world hit 93.8 million barrels in October. That's more than three million barrels higher than it was in the same month a year earlier, and a major factor dragging down prices.