The oil price was $26.61 a barrel on 22 October, more than 10 per cent less than it had been the previous week. However, the price is expected to stay within the OPEC target range of $22-28 a barrel until the course of action on Iraq becomes clear. Given the pronounced differences of opinion in the UN Security Council on enforcing weapons inspection, no decision is likely to be made soon.

Rising Iraqi production is hitting the price further. September output was 1.9 million barrels a day (b/d), according to the Energy Intelligence Group, its highest level since March. And there is evidence that much of this extra volume is being exported illegally through Syria. Given that Syrian crude production capacity is about 490,000 b/d, export levels of 598,000 b/d raised a few eyebrows – and suggested that Iraq is pumping some 292,000 b/d in exports through the pipelines to Syria’s Banias and Homs refineries.

Rising Iraqi export levels, which over the past two months have reversed the year’s trend of falling output, have been attributed to a desire to avert a war: the greater Iraq’s export levels, the greater the economic blow to the West of a shutoff.

In so volatile a climate, oil producers are mulling over their options. Alongside the traditional OPEC responses, Gulf producers are now looking to establish their own common energy policy. The strategy makes sense because many Gulf producers face similar problems deriving from their reliance on a single commodity. The Gulf is also home to 65 per cent of world oil reserves and will produce an increasing proportion of world output over the coming decades.

At a meeting due to be held in Muscat on 26 October, oil ministers will discuss a blueprint for GCC energy strategy. ‘The meeting will review current and future situations in the oil markets and results of the eighth energy forum between consumers and producers,’ said GCC secretary-general Abdulrahman al-Attiya.