Vijayakar said a reported increase in USA crude inventories was also weighing on prices.
China will also remain an important driver of growth. "The market is looking for a reason to pause", said Aaron Clark, portfolio manager at GW&K Investment Management.
The IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and 2018, to an estimated 1.5 million bpd and 1.3 million bpd, respectively, as warmer temperatures were expected to weigh on consumption while rising output might add to glut in the crude supplies.
United States government inventory data is due later on Wednesday.
West Texas Intermediate crude have both shed about $3 a barrel, or almost 5 percent, from more than two-year highs struck last week. By 11:07 a.m. (1607 GMT), U.S. crude futures were down 46 cents to $55.25 a barrel, while Brent was 63 cents lower at $61.58 a barrel. Losses were compounded by the IEA's unexpectedly gloomy demand outlook on Tuesday. But the oil market isn't tightening as quickly as once anticipated, the IEA said in its monthly oil-market report.
The Paris-based agency reduced its demand forecast for both 2017 and 2018, by 50,000 barrels per day (BPD) and 190,000 BPD, respectively.
The IEA report countered the Organisation of the Petroleum Exporting Countries (Opec), which just a day earlier said 2018 would see a strong rise in oil demand.
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Oil will continue growing as a source of energy for over two decades, with the USA set to become the undisputed leader in crude and gas production, the International Energy Agency said Tuesday.
Ahead of data from the American Petroleum Institute (API), an industry trade group, analysts in a Reuters poll forecast US crude stocks declined by 2.2 million barrels last week.
Overnight, crude oil settled lower for the third day amid ongoing concerns over rising U.S. output and build in crude stockpiles for the second week in row.
Global oil demand growth is likely to have slowed to 1.3 million bpd in the third quarter of this year, in part because of the impact of hurricanes Harvey and Irma in August and September on USA consumption.
Geopolitical tension in the Middle East and intermittent supply outages in the likes of Nigeria and Iraq have pushed oil above $60 a barrel for the first time since 2015, while global inventories have fallen, prompting many market watchers to raise their price forecasts.
OPEC meets on November 30 to discuss policy and is expected to agree an extension to its cuts.
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