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Brent crude strengthened late on Thursday, recouping some of its losses from the previous session, as market focus returned to concerns about spare capacity following a warning from the International Energy Agency (IEA).

Brent crude oil gained $1.05 a barrel to settle at $74.45, rebounding from a session low of $72.67. On Wednesday, the global benchmark slumped $5.46, or 6.9 per cent, its biggest one-day fall in two years.

U.S. crude settled down 5 cents at $70.33 a barrel, after losing 5 per cent the previous session.

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The IEA cautioned the world’s oil supply cushion “might be stretched to the limit” due to production losses in several different countries.

Ongoing concerns about supply disruptions from OPEC member Venezuela drove crude higher, said John Kilduff, a partner at Again Capital Management.

“Production issues there today were a reminder that those issues are ongoing,” he said.

Several countries have seen their output fall in recent weeks, including Venezuela, Norway, Canada and Libya.

“Rising production from Middle East Gulf countries and Russia, 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 currently underpins oil prices and seems likely to continue doing so,” the agency said.

At the same time, the U.S. has ramped up its rhetoric on sanctions against OPEC member Iran, contributing to rising prices, Kilduff said.

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Wednesday’s sharp selloff was galvanized by worries over rising trade tensions between the United States and China and news that Libya had brought some production back online. The declines have not spurred buyers to return yet, after traders sold speculative positions on Wednesday.

Libya’s National Oil Corp said it would reopen four oil export terminals, ending a standoff that had shut down most of Libya’s oil output; the reopening will bring back up to 850,000 barrels per day of crude production.

The market also expects stockpiles at the U.S. oil delivery hub to fall, traders said, citing energy information provider Genscape. Supply to the U.S. market has also been squeezed by the loss of some Canadian oil production.

Brent still may recover to above $80 a barrel by the end of the year, said Brian LaRose, a senior technical analyst at ICAP-TA. If Brent pulls to below $70 a barrel, that reduces the possibility the market will recover as quickly, he said.

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