The International Energy Agency (IEA) on Friday expected rising oil supply in the next five years boosted by increased production capacity in the United States and Iraq. It added, however, that demand risks still challenge the oil market. In its annual medium-term oil market report, the IEA saw the "global oil market to become somewhat less tight over the medium term than it has been through most of the last decade, as a combination of demand and supply factors will cause OPEC spare capacity to return to more comfortable levels." "The oil market is at a crossroads. On each and every front -- technology, geopolitics, the economy -- potentially game-changing developments are taking place," IEA executive director Maria van der Hoeven said in a statement. "The report's projection of a return to higher OPEC spare production capacity will be welcome news amid rising supply and demand risks," she added. Thanks to the "transformative power of advanced extractive technologies applied to light, tight oil deposits," American markets would lead supply rise of oil producer countries increase. Adding to that, the Paris-based organization forecast that OPEC member Iraq would bolster its production capacity set to "to enter a new growth phase, which may continue even beyond the forecast period." As for demand, the organization noted that oil requirements of "non-OECD economies is forecast to overtake that in the OECD as early as 2014." "Distillate demand is also expected to grow much faster than that for other products, so that gasoil and diesel by the end of the forecast period will account for the largest share by far of the demand barrel -- a challenge for refiners and end-users alike," an official statement said. In its new oil report, the IEA pointed also to a sharp decline in traded crude volumes on estimates of North America's reduced imports due to growing domestic production and Middle East slash of oil exports to satisafy regional needs. "Product trade may grow in both volume and scope, however," it said.