After months of stops and starts, crude flows through Iraq's sabotage-plagued northern export pipeline resumed in late August and the State Oil Marketing Organisation (SOMO) approached traders interested in liftings from the Ceyhan terminal. About 6.5 million barrels are already in storage there. The pipeline's capacity is running at about 450,000 barrels a day (b/d) and coupled with resumption of full operations at the Basra and Khor al-Zubair terminals in the south, total sales are once again set to top 2 million b/d.

Traders were also calmed by the failure of Moqtada al-Sadr's supporters to carry out a mid-August threat to target oil installations in the south of the country, although the Basra headquarters of South Oil Company were set alight on 19 August. 'The easing [of prices] has been led by a short-term improvement in Iraqi output,' says Paul Horsnell, analyst at Barclays Capital. 'However, given past experience, we doubt if traders will get carried away on the downside by believing that Iraq is now a reliable supplier.'

Elsewhere, concerns about Venezuelan supply eased as the chaos which followed the referendum on President Chavez's rule died down and the US - no fan of the left-wing ruler - accepted his victory in the vote. In Russia, the troubles of oil giant Yukos continued, as it cut its 2004 production forecast by 4 million tonnes to 86 million tonnes on 23 August. However, fears that the company's mammoth tax demand would leave it unable to pay for the transportation of the crude produced faded: Yukos has paid its transportation costs up to mid-September and China - the destination for the bulk of sales - has agreed to foot the bill beyond that date if necessary.

Nevertheless, the market is operating on a thin cushion and there are few signs of an imminent slump in prices. Verbally, OPEC is doing little to help. The group's president and Indonesia's Energy Minister Purnomo Yusgiantoro said on 19 August that, at their next meeting on 14 September, members would discuss changing the OPEC target price band. He declined to specify the options, but there is little doubt in which direction it would move. And Kuwaiti Foreign Minister Sheikh Sabah al-Ahmed al-Sabah, while blaming speculators for high prices, said on 25 August that Kuwait was producing at maximum capacity to soften the market. While the sentiment is welcome for consumers, the statement reinforces the impression that outside Saudi Arabia, spare capacity is scarce.