THE world's leading oil forecaster has warned of continuing oversupply and low prices up to 2020, in a fresh blow to the North Sea industry.

The International Energy Agency (IEA) said global demand would rise by less than one per cent a year between now and the end of the decade.

In its annual report, it warned suppressed demand would fail to soak up an oil glut that has driven prices over the past 18 months.

According to its "central scenario," prices would not recover to 80 dollars per barrel until 2020.

The forecasts provoked a fresh row at Holyrood over Scotland's economic prospects.

It came as industry body Oil and Gas UK reported a "glimmer of optimism" among companies.

Its quarterly business sentiment

index, which reflects confidence, activity levels, revenue, investment and jobs in the industry rose by two percentage points.

However, at minus 27 on a scale of minus 50 to plus 50, it remained deeply depressed.

Oonagh Werngren, Oil & Gas UK’s operations director, said: "The slight rise in optimism is counter-balanced by a large number of companies expressing concern about future activity levels, with 55 per cent reporting lower activity than the second quarter of 2015.

"Job losses continue to be a matter of concern to the majority of respondents, with just over 60 per cent indicating that headcount has already been or will be reduced."

The IEA said demand for oil was slowing after a 15-year surge in consumption, fuelled by the rapid industrialisation of China.

It warned the oil market would remain over-supplied until the end of the decade.

It said a longer period of lower oil prices could not be ruled out.

Under its "low oil price scenario," prices would stay close to 50 dollars per barrel until the end of the decade, rising to 85 dollars by 2040.

Oil has slipped from 115 dollars a barrel in June 2014 to below 50 dollars.

Jackie Baillie, Scottish Labour’s spokeswoman for public services, said: "It’s clear low oil prices are going to be with us for several years.

"When the SNP Government should have been planning for the long term future of the high value engineering jobs that the oil industry has provided they were claiming another oil boom was coming."

Scottish Conservative energy spokesman Murdo Fraser said: "Within the strength and security of the UK, Scotland can endure this uncertainty and drop in income more easily.

"However, far from ensuring the country’s economy doesn’t suffer as a result of this, the SNP still wants Scotland to be completely exposed to this.

"Only yesterday the party was arguing in Westminster for full fiscal autonomy."

A Scottish Government spokesman said: "Oil is a bonus, not the basis of Scotland’s economy.

"Scotland has huge and varied economic strengths, with five of the world’s top 200 universities, a booming food and drink industry worth over £13bn a year, a huge market for tourism, 25 per cent of Europe’s offshore wind and tidal energy and growing potential in areas like life science, low carbon manufacturing and in our rural and island economies."