Iran dominated traders’ concerns during the week. The first move was a bullish one. Supreme Leader Ayatollah Ali Khamenei warned that action taken against the Islamic republic over its nuclear programme could disrupt global oil supplies. ‘If you make a wrong move regarding Iran, definitely the energy flow in this region will be seriously endangered,’ he said in a speech on state television on 4 June. Iranian leaders have so far pledged not to use oil as a weapon in its confrontation with the international community.

However, Tehran subsequently calmed the market by agreeing to consider a package of incentives offered by the UN Security Council’s permanent five members in return for suspending uranium enrichment. ‘We prefer co-operation to confrontation,’ Foreign Affairs Minister Manouchehr Mottaki told the official Islamic Republic News Agency (IRNA) on 7 June. Iran has until the end of the month to respond.

Nigeria provided the other source of geopolitical concern, as eight foreign oil workers were taken hostage on 2 June. They were swiftly released but drew the market’s attention to the continuing instability in the country’s oil-producing regions. ‘The situation in the Niger Delta appears to us to be, if anything, getting somewhat worse,’ says Paul Horsnell of Barclays Capital. ‘Central control seems to be slipping further, and we rather doubt the repeated official statements that normality is likely to be restored very quickly.’

At its meeting in Caracas, OPEC opted to leave the 28 million-barrel-a-day quota in place. The market reaction was slight the group is already producing above that level, and producers and consumers are in agreement that OPEC is largely powerless to ease prices over the short term. The meeting’s closing communique repeated the group’s familiar message that the market is actually oversupplied with crude and that global inventory levels are comfortable. Lack of refining capacity, concern about the global supply cushion, geopolitical tension and speculation were blamed.

Reacting to concerns about downstream bottlenecks and

consumer anger at high gasoline prices, the US House of Representatives on 7 June approved legislation

that would make it easier to

build and expand refineries. No new refineries have been built in the US for 30 years.