The onset of autumn has yet to lend a seasonal lift to oil prices which are still soft after tumbling from their mid-summer highs. In the third week of September prices for dated Brent were moving in a narrow range around $15.50 a barrel which was about 15 per cent below the peak prices achieved in early August. Demand in the main industrial markets is reported to be relatively weak for the time of year, which is normally a period of heavy restocking ahead of the winter.

Refinery turnarounds are likely to depress demand throughout September and October. In October, an estimated total of 1.6 million barrels a day (b/d) of crude distillation capacity will be idle due to maintenance in the US, Europe and Japan, according to the UK weekly Petroleum Argus. This contrasts with the situation during the summer when US refineries were working at 96 per cent of capacity just before the shut down period began in September.

The uncertain outlook for prices is bolstering speculation that OPEC is likely to roll over its current quota agreement at the next ministerial meeting in Bali in November. The OPEC basket price has averaged $15.23 a barrel so far this year compared with an average of $16.33 a barrel in 1993.

A long-term challenge for OPEC was launched on 20 September in Baku when a consortium of oil companies led by The British Petroleum Company (BP) signed an $8,000 million production sharing deal with the Azerbaijani state oil company, Socar. The 30-year contract calls for production of 80,000 b/d by 1997; output is expected to reach an eventual peak of 700,000 b/d. The offshore fields in the Caspian sea are estimated to have reserves of 3,800 million barrels. Other investors include Amoco, McDermott, Pennzoil and Unocal, all of the US, Russia's Lukoil, Ramco of the UK, Norway's Statoil, Turkish Petroleum and Delta, a Saudi Arabian company. Socar has a 20 per cent stake in the venture. Current production in Azerbaijan is 160,000 b/d.

The route of an export pipeline has yet to be chosen. Russia wants the export line to cross its territory using an existing pipeline which will be upgraded and the Foreign Affairs Ministry in Moscow has refused to recognise the BP agreement. An alternative proposal is for a line to be built across Iran and Turkey (see Turkey). Initial sales are expected to be concluded through swap arrangements with Iran and Russia.