Signs early in the week that Iraq was keen to reach agreement with the UN about the readmission of weapons inspectors took about $1 off prices on 3 September. However prices edged up the following day as the US and the UK hardened their stance towards Baghdad, and reports circulated about the start of a US military build-up in the region.

The market has also been affected by the conflicting signals coming from OPEC in the run-up to its 19 September ministerial meeting in Osaka. Most OPEC ministers have indicated that they are reluctant to increase quotas, even though actual production is running as much as 2.2 million barrels a day above the present quota.

Analysts say OPEC is concentrating for now on meeting market requirements at a time when the Iraq crisis is producing a great deal of uncertainty. Much of the extra OPEC output is effectively compensating for the sharp reduction in Iraqi crude supplies.