Tehran's stand-off with the international community over its nuclear ambitions has been supporting prices for several weeks. Economy Minister Davoud Danesh-Jafari, speaking on state radio on 15 January, explicitly brought oil into the equation, warning that prices could rise by more than the West expects if sanctions were imposed by the UN Security Council.

In Nigeria, militants in the oil-rich Niger delta threatened oil workers and launched a string of attacks against oil infrastructure in mid-January. The Royal Dutch/Shell Group, the country's main foreign producer, was forced to shut in some 200,000 barrels a day (b/d) of production. In Europe, fears arose about shortages of natural gas as Russia cut supplies in order to meet increased domestic demand created by a harsh winter.

The IEA's first report of 2006 put overall world demand growth in 2005 at 1.3 per cent and estimated the growth rate this year at 2.2 per cent, as US and Chinese demand rise. OPEC's December production fell by 280,000 b/d to 29.3 million b/d, the report said, mainly due to declining output from Iraq and Nigeria. The call on OPEC crude is forecast to increase by 200,000 b/d to 28.6 million b/d in 2006.