Brent crude, the global oil benchmark, was 2 per cent higher at $74.87 per barrel in morning trading, having slumped nearly 7 per cent on Wednesday on fears that rising US-China tensions could hit demand.
"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.
USA benchmark West Texas Intermediate crude edged down 12 cents to $70.21 a barrel, after falling 5 cents in the previous session.
On the bearish side this week, the surprise announcement by Libya to return oil to the market is being blamed for triggering steep losses on Wednesday.
The reopening will allow the return of up to 850,000 barrels per day of high-quality crude to global markets.
The IEA welcomed in its July report last month's agreement between the Organisation of the Petroleum Exporting Countries (Opec) and Russian Federation to open the taps in order to bring prices down from multi-year highs.
The IEA cautioned that the world's oil supply cushion "might be stretched to the limit" due to production losses in several different countries.
The IEA report was published a day after both main oil contracts were sent into freefall by worries over a stronger dollar and the impact of the global trade war on demand.
China's crude oil imports fell for a second month in a row in June as shrinking margins and volatile oil prices led some independent refiners, known as "teapots", to scale back purchases, official data showed on Friday.
The decline in US inventories was partially due to a fall in stocks at the Cushing, Oklahoma delivery hub for USA crude futures, which dropped 2.1 million barrels.
Supply to the US market has also been squeezed by the loss of some Canadian oil production.