As crude oil prices dip to seven-year lows, it appears global oil markets will remain oversupplied at least until the end of 2016 as demand growth slows and OPEC output booms. Correspondent Grace Pascoe reports the warning from the International Energy Agency comes after a bad week for markets.

Video Transcript:

A seven-year slump for crude oil prices.

And the International Energy Agency is warning there could be worse to come throughout 2016.

Brent slipped below $39 per barrel for the first time since December 2008 on Friday.

Brenda Kelly is from London Capital Group.

"Markets don't necessarily believe that there will be any cutback in production by any of the OPEC members in the very near term and that is ultimately one of the key reasons why we have seen an 8 percent drop over the last week of so. But ultimately I don't think it is all down to supply, I do feel demand is also a major issue there and that is really denting sentiment across the broader market as a result."

An oil well pump jack is seen at an oil field supply yard near Denver An oil well pump jack is seen at an oil field supply yard near Denver, Colorado February 2, 2015. Photo: REUTERS/Rick Wilking

Depressed oil prices didn't help global stock markets either.

The mood sombre after China's yuan hit 4 1/2 year lows.

Posting its longest weekly losing streak in a decade.

The question now is how far Beijing intends to let the currency depreciate?

"This devaluation that we have been seeing by the Chinese since August has been a key part in delaying any major decisions from the Federal Reserve and ultimately I think they are attempting to get ahead of the curve by devaluing their currency as the U.S. dollar continues to strengthen," explains Kelly.

European shares opened at a two-month low.

And emerging market stocks tanked for an eighth day running, on course for their worst week since September.