Venezuela's situation grows increasingly worrying and the expected drop in production from Iran means that prices are expected to reach four-year highs once again.
The Secretary-General, Organisation of the Petroleum Exporting Countries (OPEC), Mohammed Barkindo, attributed the rising oil prices to efforts by OPEC and non-OPEC countries to rebalance the market through production freeze.
"U.S. shale can not solve the current oil supply problems", it said, arguing that US oil would not be sufficient to offset production losses from Iran, Venezuela and Angola. At what point does the price of oil cut demand.?
Up to 1 million b/d of Iranian oil exports could by affected by the U.S. move with Iran's biggest oil buyers, China and India, expected to continue importing its oil.
"Looking into the next 18 months, we expect global oil supply and demand balances to tighten, driven by the ongoing collapse in Venezuelan output", the report said.
Oil has risen 51 per cent in the previous year, driven by coordinated supply cuts and, this month, by concern over Iranian supply after the United States said it would reimpose sanctions on Tehran over its nuclear activities.
Oil prices, which had already risen on the back of steady demand growth and a landmark deal by oil producing countries to lower output, had now surged to above $77 per barrel the IEA noted.
Daily July Brent Crude
Brent crude futures LCOc1 were at $79.40 per barrel at 0655 GMT, up 0.12 percent from their last close.
While it's "too soon to say what will happen this time", the agency said, Iran's fellow OPEC members could fill the gap because their pact to restrain supply leaves them with spare production capacity. The high price of Brent is attracting USA exports.
As a result of its surging production, US crude is increasingly appearing on global markets.
Mihir Kapadia, CEO and founder of Sun Global Investments, agrees that geopolitical tensions are driving energy prices higher, with unrest is building in Venezuela ahead of this weekend's presidential elections.
Oil stocks were expected to drop further as the peak summer driving season nears, offsetting increases in US shale output, said analysts at Bernstein.
The current oil price is also higher than the World Bank's projected average of $65barrel this year, up from last year's average of $53/barrel.
"During the meeting, Mr. Khoshrou conveyed Mr. Zarif's message that Iran hopes China will maintain the levels of imports", said one person briefed on the meetings.
The view of top exporter Saudi Arabia is that any brief, speculator-driven jump in oil prices is not sufficient grounds for producers to boost output, an OPEC source familiar with the kingdom's thinking said.