Rising global oil supply, driven by crude giants Saudi Arabia and Russian Federation, may come under pressure as key producers face disruptions, the International Energy Agency said Thursday.
Benchmark Brent crude oil rose $1.66, or more than 2.2 percent, to a high of $75.06 a barrel before easing back to trade around $74.80 by 0815 GMT. Iran has already seen its shipments to Europe fall nearly 50 percent as USA penalties deter buyers, and the country's total exports could slump even more, according to the agency, which advises most of the world's major economies.
The kingdom has faced elevated pressure from the likes of China, India and the U.S.in recent months, with all the big crude importers citing anxiety over rising fuel costs.
"Warnings from the IEA of a potential spare capacity crunch are helping the energy complex ... following yesterday's bloodbath", said Stephen Brennock, analyst at London brokerage PVM Oil Associates. "Sharp attempts to recover are to be expected".
An announcement by Libya's National Oil Corp that four oil export terminals were reopening, ending a standoff that had shut down most of Libya's oil output, was a key catalyst for the price fall on Wednesday, analysts said.
"Despite higher output in June, OPEC oil supply was down 700,000 barrels per day compared to a year ago, with Venezuela lower by almost 800,000 barrels per day, Angola by 210,000 barrels per day and Libya by 130,000 barrels per day", the IEA said.
The global energy watchdog, however, said the disruptions underscored the pressure on global supplies as the world's spare production capacity cushion "might be stretched to the limit".
"This will become an even bigger issue as 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 IEA report showed further signs that prices are taking a toll, with global demand growth slowing in the second quarter to just 900,000 barrels a day.
"This vulnerability now underpins oil prices and seems likely to continue doing so", the IEA added.
Prices also found support from a US stocks report showing USA crude inventories fell by almost 13 million barrels last week, the most in almost two years, reducing overall crude stocks to their lowest point since February 2015.
"For WTI (U.S. light crude) there is tightness at Cushing, which will be supportive over July and August", said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.
The selling was also fanned by Libya's resumption Wednesday of oil exports from its eastern production heartland after a showdown between the war-torn country's rival authorities.