The International Energy Agency (IEA) released its monthly report on Tuesday. The agency said that oil oversupply will persist until at least late 2016, driven by a warm winter and the slowdown in the global economy.

Global oil demand dropped to 1 million barrels a day (mbd) in the fourth quarter from 2.1 mbd in the third quarter.

The IEA expects global oil demand to expand by 1.2 mbd this year, unchanged from its previous estimate, down from 1.8 mbd in 2015.

"We conclude that the oil market faces the prospect of a third successive year when supply will exceed demand by 1 million bpd and there will be enormous strain on the ability of the oil system to absorb it efficiently," the IEA said.

The agency also said that oil supply from non-OPEC producer is expected to decline by 600,000 mbd this year, while Iran's output is expected to rise by additional 300,000 mbd by the end of the first quarter.

The IEA cut OPEC oil demand forecasts by 300,000 mbd to 31.7 mbd in 2016.