New York — Oil prices fell on Thursday, extending the previous session’s sharp losses as Libyan exports resumed, despite the International Energy Agency’s (IEA) warning that the world’s oil supply cushion "might be stretched to the limit" due to production losses.

Brent crude oil gained 15c a barrel to trade at $73.55 by 355pm GMT, after earlier trading at a session low of $72.67. On Wednesday, the global benchmark had slumped $5.46, or 6.9%, its biggest one-day fall in two years. US crude fell 63c to $69.75 a barrel, after losing 5% the previous session.

Early in the session, both benchmarks pushed briefly higher on US President Donald Trump’s comments that his administration would try to negotiate a fair trade deal with China.

"The market was still nervous," said Phil Flynn, an analyst at Price Futures group in Chicago. After US crude briefly traded above $71 a barrel, traders exited positions, leading the market lower to test below $70 a barrel, he said.

The market continued in the grips of bearish supply news. The announcement that Libya’s National Oil Corporation (NOC) would re-open four oil export terminals, ending a stand-off that had shut down most of Libya’s oil output, was a key catalyst for a dramatic sell-off on Wednesday, analysts said.

The re-opening will allow the return of up to 850,000 barrels per day (bpd) of high-quality crude to international markets. Two Libyan oil fields will re-open, NOC and industry sources said on Thursday, easing supply concerns that have boosted the market.

Focusing on bearish factors, the market shrugged off warnings from the IEA that there is potentially a spare capacity crunch. "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 agency said in its monthly report. "This vulnerability currently underpins oil prices and seems likely to continue doing so."

The market also brushed off bullish data from information provider Genscape, which reported that inventories at the Cushing, Oklahoma delivery hub had fallen 929,399 bpd from July 6 to 10, traders said. Supply to the US market, particularly Cushing, has also been squeezed by the loss of some Canadian oil production.