This Dec. 3 file photo a sign displays the price for E-10 gasoline for $1.99 at the OnCue convenience store and gas station in Oklahoma City. (EDMOND SUN OUT, OKLAHOMA GAZETTE)

Oil prices continued their slump even lower today, with West Texas Intermediate crude -- a U.S. benchmark -- now well below $60 per barrel. This is part of a momentous decline of over $40 per barrel since late June.

One catalyst today is the International Energy Agency's release of its latest Oil Market Report, which lowered the agency's forecast for global oil demand growth in 2015 by 230,000 barrels per day. This means that demand in 2015 is only expected to exceed demand this year by .9 million barrels per day, a sluggish 1 percent rate of growth.

The report could not be more plain that the fundamental cause of the sharp oil price decline -- whose knock-on effects include markedly lower gas prices in the U.S., and soon, perhaps, lower airfares -- is an imbalance between supply and demand.

Or as IEA puts it: "Several years of record high prices have induced the root cause of today’s rout: a surge in non‐[Organization of Petroleum Exporting Countries] supply to its highest growth ever and a contraction in demand growth to five‐year lows."

The report provides this telling figure -- showing a gulf opening between levels of global oil supply, and global demand to consume that oil:


Credit: International Energy Agency, Oil Market Report, December 12, 2014.

The IEA also goes into great depth about which countries are creating these imbalances. Demand in Europe, Japan, and China is slack or less than expected -- even as production in the United States is way up, and the OPEC nations are keeping production steady.

The biggest country-level headline from the report, though, involves Russia.

The report issues what it calls a "severe downgrade" in its forecast of Russian oil demand, due to the fact that economic activity is expected to decline markedly in the country -- itself partly a result of oil revenues decreasing as oil prices have slumped (as well as international economic sanctions).

And according to IEA, there may be no letup any time soon to the downward economic pressures on oil prices. "It may well take some time for supply and demand to respond to the price rout," writes the agency.