Oil rebounded towards $81 a barrel on Friday as an equities rally lent support, though prices pared gains after a closely watched forecaster deemed supply adequate and the outlook for demand weakening.
Speaking on the sidelines of an event by Columbia University on Friday, Nephew expected that Iranian crude oil exports would be as much as 1.3 million barrels per day as of November 4.
The agency showed particular concern that with peaks in both crude oil production and crude oil demand, both at almost 100 million barrels per day, the spare capacity of the world has been reduced "to only 2 percent of global demand".
US West Texas Intermediate (WTI) crude futures were up 75c, or 1.1%, at $71.72 a barrel, after a 3% fall in the previous session.
"The decline may deepen significantly ahead of US sanctions - and subsequently as final cargoes are delivered", said the IEA, which advises major oil consumers on energy policy. US crude added 71 cents to $71.68.
Reduced growth estimates from the International Monetary Fund, trade disputes and the strain of high oil prices all fed into the downgrade to consumption, the Paris-based IEA said in its monthly report.
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The IEA warned that recent peaks in supply and demand have put a strain on spare capacity.
Overall, OPEC had boosted production by 735,000 bpd since May as Middle East Gulf producers such as Saudi Arabia and the UAE more than compensated for declining output in Venezuela and Iran, which is facing US sanctions from next month.
Members of the Organization of the Petroleum Exporting Countries (OPEC) and other exporters such as Russian Federation agreed in June to raise output as the market appeared increasingly tight.
Crude was still heading for its first weekly drop in five weeks, pressured by a big rise in USA inventories and fading concerns that looming US sanctions on Iran will cut supplies significantly.
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United States oil production reached a record-high 15.6 million b/d in July, up 2.4 million b/d year on year, while United States offshore production in the Gulf of Mexico rose by 190,000 b/d to a record-high 1.85 million b/d, it said. In the US Gulf of Mexico, companies cut output by 40 per cent on Thursday because of Hurricane Michael, even as some operators began returning crews to offshore platforms.