Brent crude futures stood at $32.99 on 18 February, down from $35.40 a week earlier. The marginal fall came on the back of indications that the march to war on Iraq had been slowed, with a less harsh than expected report on Iraq from UN weapons inspections chief Hans Blix, statements in favour of giving inspectors more time from permanent UN Security Council members France, Russia and China and anti-war protests around the world.

Global first-quarter demand is up 1.5 million barrels a day (b/d) on the same period last year as a result of the cold western hemisphere winter and improved economic conditions. Despite repeated promises from OPEC that the market would be kept supplied in the event of war on Iraq, production has not increased sufficiently to reduce current prices.

'The market remains very tight,' said a London-based analyst, adding that swing-producer Saudi Arabia had been cautious about large increases in output because of the danger that by the time the oil hit the market in the second quarter, demand might have fallen off.

Venezuelan production has climbed back up to about 1.7 million b/d, roughly 50 per cent of levels before the strike at state oil company Petroleos de Venezuelos (PdV) paralysed the country's oil industry. Oil analysts forecast that 90 per cent of production can be restored over the course of the next two months, but that the final 10 per cent will take considerably longer.

A potential new threat to supplies has emerged in the form of a strike by oil export workers in Nigeria, OPEC's fourth biggest producer. However, international oil companies have not reported any significant disruption so far.

The International Energy Agency (IEA) in its February report warned that if Venezuelan production continued to creep up and Iraq's 2.4 million b/d was not cut off for long, if at all, the normal second- quarter drop in demand would leave the market oversupplied, requiring swift OPEC production cuts to prevent a price collapse.

'If Iraqi production was out for the whole of the second quarter, then there would be an oil shortage. If there is no war there will probably be over-supply in the second quarter. A one-month Iraqi outage would probably best balance the market,' says an industry analyst.