Despite robust production and supply, oil markets are tightening, meaning that a disruption in any major producer could lead to a material impact on prices. "We are entering a very crucial period for the oil market," the IAE report stressed.
"The market is expected to tighten during the later part of this year, because if Iran's exports do fall by a considerable volume, we'll be relying on other producers to increase their output to make up for that," Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC on Thursday. He described Iraq, Libya, Nigeria and Saudi Arabia as some of the producers having the spare capacity to see more output increases in the coming months.
But this in itself is not certain: instability in Iraq and Libya in particular could disrupt supply levels.
Iraq, OPEC's second-largest producer which saw near-record production in August at 4.65 million bpd, is currently witnessing violent protests in and around Basra, which hosts the majority of its oil production facilities and its only deepwater port. Demonstrators have blocked roads and threatened to shut down oil facilities in protest against failed state services, unemployment and political corruption.
Meanwhile Libya, posting a major output rebound in the same month of 280,000 bpd to reach 950,000 bpd, remains vulnerable to disruptions due to continued unrest and security problems. The U.S. Treasury department in conjunction with the United Nations on Wednesday imposed sanctions on a leading Libyan militia leader for his attacks on vital oil facilities in June.
In terms of the drop in output from Iran and subsequent impact on oil prices, there is "no way of knowing" how much its exports will fall, Atkinson said. While some analysts have suggested oil could hit $100 a barrel in the aftermath of the sanctions, Atkinson refrained from making any calls, saying "it's pure speculation to try and put a figure on it."
"It's a question of waiting to see in these next few weeks how the period in the run-up to November 4th plays out," he said, alluding to planned talks between the U.S. government and other countries like India, China and South Korea. "And then we'll have a clearer idea of where things might go."