The anticipation of reduced output is one factor stabilising prices. ‘The assumption is that we will see a production cut,’ says Geoff Pyne of Sempra Energy Trading. ‘An informal but truthful agreement to at least keep an eye on quotas, if not absolutely complying with them, appears the most likely outcome.’ OPEC 10 production was 26.5 million barrels a day (b/d) in March, compared with an official ceiling of 24.5 million b/d. The difference is the amount by which OPEC President and Qatari Energy & Industry Minister Abdullah bin Hamed al-Attiya estimates that the market is oversupplied. Stocks remain low in the US, EU and Japan, but there is a considerable amount of crude on the water that is not recorded in inventories.

The Iraq factor has been tugging prices in contrary directions. While most analysts regard as overly optimistic the assertion by US Vice-President Dick Cheney that Iraqi production could be raised to 3 million b/d by year-end, there are signs that output could resume sooner than the three months initially envisaged. ‘I think we could see a resumption of Iraqi exports much sooner than people think – perhaps within four-six weeks,’ says Mehdi Varzi of Dresdner Kleinwort Wasserstein. ‘There are already some 8 million barrels in storage at the Ceyhan terminal.’

On the other hand, there are fears that a resumption of Iraqi oil sales could become mired in political wrangling at the UN. Without a new UN resolution revising the oil-for-food programme, no-one has the legal authority to sell the oil – authority that previously rested with the deposed Baghdad government. ‘There is a legal problem with Iraq’s oil,’ Khelil warned. ‘A lot of water will run under the bridges of Baghdad before we see it solved.’

The International Energy Agency (IEA), releasing its monthly report on 10 April, praised OPEC’s efforts to keep the market supplied during war, and cautiously accepted the need for a production cut. ‘There is little doubt that OPEC has done much to calm an otherwise jittery market,’ the report said. It estimates that demand on OPEC crude will average only 24.8 million b/d in 2003, but warned: ‘The real question mark remains over the timing, extent, distribution and duration of any cut.’ The IEA forecasts global demand growth of 1.1 million b/d to 28 million b/d for 2003.