Oil prices slipped back another $3 in the third week of November, although the fall needs to be put in perspective since prices remain more than 50 per cent higher than a year ago. Events in Nigeria and the state of the US market provided some downward pull. However, it is the lack of any significant supply shocks since the beginning of November that has calmed the market. Spot Brent was trading at $40.90 a barrel on 17 November, compared with $43.62 a week earlier.
In the absence of major events speculation takes hold, and the gradual growth in US crude stocks over recent weeks has prompted big-money speculative funds to unwind their positions. Crude inventories built by a further 0.3 per cent to 292.3 million barrels in the week to 12 November, and production from the Gulf of Mexico is recovering and is now running at only about 13 per cent below normal capacity. However, heating oil stocks offer a potential upside - these have fallen for nine consecutive weeks in the US and are also looking tight in Japan and Germany. Analysts warn that a sudden cold snap could prompt a spike in prices, while weather forecasters are predicting exactly that. In Nigeria, unions called off at the last minute their threat of an indefinite general strike from 16 November, when the government acceded to their demand for a cut in domestic fuel prices. There was never much chance of a major impact on oil exports but such events bring to the fore the simmering instability in one of the world's largest producing countries. In Iraq, exports from both northern and southern facilities have stabilised at about 500,000 barrels a day (b/d) and 1.6 million b/d, as the authorities managed to repair swiftly damage to the northern pipeline from sabotage attacks earlier in the month. However, the insurgents signalled their determination to continue the war of attrition with an attack on a domestic pipeline linking the Baiji and Doura refineries on 17 November. OPEC's eyes are now turning to its next meeting, in Cairo on 10 December. The pre-gathering chatter has already begun, with Tehran making the opening salvo. A senior official said in mid-November that members should start adhering to production quotas which are currently being flouted to the cumulative tune of 1.5 million b/d.