Gatwick is pumping oil REUTERS/Shamil Zhumatov The price of oil could be set for another substantial drop following news from one of the oil industry's most respected organisations that the global supply-and-demand problem will take longer to clear than had been previously expected.

"Global oil demand growth is slowing at a faster pace than initially predicted," the International Energy Agency's most recent Oil Market Report argues.

"For 2016, a gain of 1.3 mb/d is expected — a downgrade of 0.1 mb/d on our previous forecast due to a more pronounced 3Q16 slowdown," the report said. "Momentum eases further to 1.2 mb/d in 2017 as underlying macroeconomic conditions remain uncertain."

Oil will remain in oversupply until at least the end of the first half of 2017, the IEA argues. Previous predictions in the markets had pointed to a rebalancing by the end of 2016.

The September edition of the Oil Market Report, one of the most watched monthly releases in the oil industry, shows that during August, OPEC producers increased productions to near record levels, further exacerbating the gulf between supply and demand, something that will almost inevitably lead to further slides in the price of the world's most important commodity.

"OPEC crude production edged up to 33.47 mb/d in August — testing record rates as Middle East producers opened the taps," the IEA reported. "Kuwait and the UAE hit their highest output ever and Iraq lifted supplies. Output from Saudi Arabia held near a record, while Iran reached a post-sanctions high. Overall OPEC supply stood 930 kb/d above a year ago."

Oil fell on news of the report's findings, and at about 11:25 a.m. BST (6:25 a.m. ET) both major benchmarks were lower by more than 2%. US West Texas Intermediate crude was down 2.53% at $45.12, while Brent crude was 2.17% down. Here's how US crude looked a few minutes ago:

The lack of a rebalancing is causing people to scratch their heads, the report noted, saying: "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."

Saudi Arabia and Russia hold the keys

The oil industry was given some hope last week that an agreement between Russia and Saudi Arabia — two of the world's most powerful producer nations — to freeze production could be forthcoming, helping to rebalance the markets.

In what was touted as a "significant announcement," however, the Saudi oil minister, Khaled al-Falih, told reporters at the G-20 conference in China that the two countries held discussions about the state of the oil markets that brought them "closer together."

This was a major disappointment to many in the markets, who had expected an announcement of a decisive plan of action, rather than a pretty lukewarm announcement of vague "talks" between the nations.

That announcement came after Saudi Deputy Crown Prince Mohammed bin Salman told Russian President Vladimir Putin on the sidelines of the summit that cooperation between the two countries would bring benefit to the global oil market, according to a report from Reuters.

Russia and Saudi Arabia are probably the two most important oil producers, with Saudi Arabia the de facto leader of the OPEC cartel of oil-producing nations. Russia, alongside the US, is one of the two biggest non-OPEC producers. What the two nations do regarding oil policy has profound effects on the markets. For example, at April's massively anticipated OPEC meeting about a freeze in production, Saudi Arabia refused to cooperate unless Iran joined in any production freeze, and as a result the meeting ended up as a damp squib.

With the two nations starting to work together, hopes for a solution to the massive glut in the oil industry are rising. We have seen promises of cooperation before, however. For instance, in August, Russia's oil minister, Alexander Novak, told a Saudi newspaper: "With regard to the cooperation with Saudi Arabia, the dialogue between our two countries is developing in a tangible way, whether in the framework of a multiparty structure or on a bilateral level."

While both Saudi Arabia and Russia seem to be talking a good game on cutting production, there hasn't been any decisive action on a freeze, and that is what seems to be dominating market thinking right now. Until the two nations stop talking and actually do something material to address the imbalances in the markets, prices will remain depressed.