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.
US benchmark West Texas Intermediate crude CLc1 lost 22 cents to $70.11, set for a weekly decline of around 5 percent.
Oil prices fell more than 1 percent on Friday, set for a second straight week of decline as Libyan ports reopen and amid hopes that Iran will still export some crude despite USA sanctions.
"The market fell out of bed yesterday as support failed (but was). probably overdone to the downside", said Robin Bieber, technical analyst at London brokerage PVM Oil Associates.
The IEA cautioned that the world's oil supply cushion "might be stretched to the limit" due to production losses in several different countries. "Sharp attempts to recover are to be expected".
An announcement by Libya's National Oil Corp (NOC) 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 a dramatic sell-off on Wednesday, analysts said.
The reopening will allow the return of up to 850,000 barrels per day of high quality crude oil to worldwide markets.
But supply concerns were highlighted again by the IEA, which reminded investors of the large number of output disruptions keeping pressure on global oil supply.
"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. This vulnerability in the market was likely to continue to underpin high oil prices, the Paris-based agency warned in its monthly report, with demand growth likely to remain strong despite higher...
"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.
Oil prices edged lower on Friday and were set for a second weekly fall, as the market shrugged off a warning that spare capacity may be stretched as OPEC and Russian Federation increase production.