BofA had previously said cutting Iran exports to zero could push up oil by $50 a barrel, if top producer Saudi Arabia cannot keep up production.
A number of uncertainties for global oil supply and demand could keep prices volatile in the near term, EIA said, including the impact of USA sanctions on Iranian oil buyers, sharp production declines in Venezuela, conflicts in Libya shutting export infrastructure, and the status of the supply cut agreement between OPEC and non-OPEC producers. And while Iran has yet to feel the full impact of renewed U.S. sanctions, the IEA fears there could be "an even steeper reduction than the 1.2 million barrels per day seen during the previous round of sanctions".
While the USA and China signalled they are open to resuming talks, uncertainty continues to swirl over whether the trade conflict between the world's two biggest economies will jeopardise oil demand. Sentiment at one point was incredibly bullish towards oil, thanks to ongoing supply disruptions and optimism over stronger global economic growth boosting demand.
"We see no sign of higher production from elsewhere that might ease fears of market tightness", the IEA said. Distillate saw a big jump in supply rising by 4.125 million barrels.
He says that while supply could be disrupted again at any time he would expect the market to initially shrug that off on the assumption, given today's experience, that would likely to be short-lived. Production and export operations will return to normal levels within the next few hours. Saudi Arabia also vowed to support the market.
These concerns outweighed concerns about tighter crude supply and shrinking spare output capacity among producers.
"Rising production from Middle East Gulf countries and Russian Federation, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit", the Paris-based IEA said in its monthly report.
The IEA maintained its 2018 oil demand growth forecast at 1.4 million bpd, but warned that higher prices could dampen consumption.
The Saudi increase raised overall OPEC production to more than 32.3 million bpd in June, up 173,000 bpd from the previous month.
An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. They averaged $2.89/gal in June, down 1 cent from May. The premium for the front-month Brent contract traded over the following month's settlement fell from a high in April to a discount this week in a condition known as contango. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN.