Events affecting the oil market in recent months have come in pairs. First, it was the Venezuelan strike and the run-up to the war in Iraq, which drove up prices. Then came the outbreak of war in Iraq and the Nigerian shut-ins, which have served to push prices down. As the coalition advanced on the Iraqi capital in early April, the situation in Nigeria showed signs of improvement. ChevronTexaco, which evacuated staff in the wake of ethnic violence in the volatile Niger Delta region, aims to restore 310,000 barrels a day (b/d) out of its 440,000-b/d output of Escravos crude capacity by the end of April. The Royal Dutch/Shell Grouphas been more cautious about resuming operations, but increases in production from unaffected regions are compensating for some of the shortfall. However, a series of elections beginning on 12 April threaten further disruption.

In Iraq, the focus has shifted back to the resumption of crude exports. A group of Iraqi oil experts, established under the aegis of the US State Department, concluded on 6 April that the sector should be swiftly opened up to private investment and suggested that an exemption from quotas might be sought, sending a shudder through the market. 'There should be no problem with OPEC until we reach the 3.5 million [barrels a day] we had before sanctions,' said one delegate. 'After that we will have to raise the question of our special case for rebuilding.'

Increased OPEC production in March, driven by Saudi Arabia pumping at its highest level since 1981, is coinciding with a period of weaker oil demand. Excluding Iraq, average March output reached 26.5 million b/d - its highest for two years.

However, some commentators dismiss talk of a price collapse. Most producers are close to capacity and stocks remain low. US crude stocks fell 1.3 per cent in the week ending 4 April to 277.1 million barrels, as imports slowed. UK troops in southern Iraq report that it will be at least three months before exports resume, when American demand should pick up again as the summer driving season gets under way.