Analysts pointed to low stocks - US crude rose only 0.6 per cent to 288 million barrels in the week to 25 April and fell back 0.3 per cent to 281.2 million barrels in the week to 2 May - to refute predictions of a price collapse in the wake of OPEC's ambiguous 24 April quota increase. 'The market is now going to focus on stocks,' says a Paris-based analyst. 'All the estimates are saying that the market is oversupplied, but on the other hand stocks are still low. People are waiting for this oversupply to show up in US stocks.

Slow gasoline build-up in the US, caused by shortages and high heating oil demand in the first quarter, has pushed up pump prices and created the perception of an oil shortage. With the peak gasoline demand season approaching, refineries are ramping up production, making an accelerated crude inventory build-up unlikely. 'We are now getting to the point where the bulge in imports to the US will begin to disappear [as OPEC's cut takes effect], constricting the flow in the following weeks,' says Paul Horsnell, analyst of JP Morgan Chase & Company. 'In other words, the issue with crude oil is not that inventories have been built, but rather that they have not built by more, given that the time available to gain more headroom is beginning to run out.'

As the immediate price situation steadies, thoughts are turning to the impending challenge of resuming Iraqi exports. Output from the northern fields stands at about 60,000 barrels a day (b/d) and from the southern fields at 175,000 b/d. Most analysts are predicting a return around the beginning of June, coinciding with OPEC's next meeting.

'OPEC is still overproducing and the market could collapse without a further cut at the June meeting,' says Leo Drollas of the Centre for Global Energy Studies. 'It needs to cut another 2 million barrels if Iraq comes back as expected.'