IF 1996 was a year that the oil analysts got wrong, this year is starting to look like one they have read right.

There haven't been any major crises to make a nonsense of all the forecasts and prices have been far more stable. True, they have fallen back by somewhat less than expected - about $1.15 a barrel from last year's average - but there has been good reason for the continued buoyancy.

Rising demand is the driving force behind the strength, with demand forecasts being revised upwards during the course of the year, despite the downturn in some of the Asian economies, where oil demand has been growing fastest. US growth is still bowling along, sucking in more oil, while Japanese demand is rising.

This has obliged the Paris-based International Energy Agency (IEA) to raise forecasts regularly for demand in its monthly bulletins. It projects demand of 73.7 million barrels a day (b/d) for October. Demand forecasts for the fourth quarter of 1997 and the first quarter of 1998 suggest an increase of 2 million b/d from one year earlier.

The supply side has proved harder to predict. Non-OPEC producers, particularly in the North Sea, have continued to disappoint. The huge increments that were expected to flood the market this year and last have not materialised. A number of fast-track projects have hit technical problems, delaying start-up and squeezing supplies.

The IEA has had to reduce its 1997 non-OPEC supply forecast by 800,000 b/d because of the setbacks, 700,000 b/d of it due to North Sea delays.

OPEC producers have been the beneficiaries. The call on OPEC crude has risen steadily and could be as high as 28 million b/d in the fourth quarter. Production by the 11 remaining members of the group is rising significantly. According to Petroleum Argus estimates, production hit a 17-year high in September of 27.62 million b/d.

This makes a mockery of the quota system which once held OPEC together. But violations of the 25.033 million b/d quota agreement matter very little - for the time being. OPEC is selling into an expanding market and for the first time in years, it is OPEC producers that are satisfying the new demand rather than their non-OPEC rivals.

However, patterns are changing. Middle East producers are being squeezed by Brent and West African oil in the Atlantic basin and more Gulf oil is going to Asia. Due to the inexorable rise of its production, Venezuela has become the largest oil supplier to the US, the world's biggest oil importer, edging Saudi Arabia out of the top spot.

Venezuela has also cast itself adrift from the old OPEC consensus. It is producing 880,000 b/d above quota and has no plans for future restraint; Caracas could be producing 7 million b/d within 10 years, against a current quota of just 2.359 million. Nigeria and Qatar are set on a similar course, albeit on a much smaller scale.

Iraq has proved to be the maverick of the oil market once again this year. Since the oil-for-food deal began last December, it has become a weapon in Baghdad's stormy relationship with the United Nations and the US with its power of veto in the UN Security Council. In June, Iraq suspended exports of about 700,000 b/d in a showdown with the UN. Oil prices, which were at their low for the year on 6 June - at $16.65 a barrel - rebounded immediately. Without the Iraqi suspension, they would almost certainly have fallen further. Baghdad could be in a powerful position again to affect the oil markets when the current deal expires in early December. With global stocks still low by historic standards, another suspension could send prices sky high. Conversely, a smooth transition to another six-month agreement with the UN should help ensure stability.

Iraq and the Gulf still exert enormous influence over the oil market where sentiment seems more often influenced by febrile speculation than real substance. The dispatch of the US aircraft carrier Nimitz to the region was enough to send prices surging in late September and early October. Saddam Hussein could do the same again in December.