The rally came a week after OPEC decided on 4 December to roll over production quotas, knocking more than 5 per cent off crude prices. Producers have signalled their concerns over a possible supply glut in early 2004 by calling an extraordinary meeting on 10 February, but talk of possible production cuts is unlikely to have much influence on the market at this stage. However, the weakness of the US dollar is fuelling bullish sentiment in the market. Saudi Arabia has said that the decline in the currency’s purchasing power justified prices at the top end of the OPEC $22-28 price band. Secretary General Alvaro Silva said on 8 December the organisation is considering trading oil in euros to compensate for the currency decline, or possibly even trading in a basket of currencies.

Further price support was provided on 10 December by weekly data from the US Energy Information Administration, which shows falling supplies of crude and distillates. Total inventories fell in the previous week by about 1 million barrels of crude and 1.4 million barrels of distillates, including heating oil.

In the longer term, the IEA now estimates global oil demand to grow next year by 1.16 million barrels a day (b/d), from an earlier estimate of 900,000 b/d. Absolute demand for 2004 is forecast at 79.6 million b/d, led by industrial growth in China, where the IEA says oil demand is growing at a ‘breakneck pace’.