Oil prices have softened following evidence that recent disruptions have not created any shortages in supply. However, analysts say the slight decline in prices apparent in mid-August could soon be reversed if the political crisis in Nigeria worsens and supplies are affected.

The oil workers' strike in Nigeria has cut output by 500,000 barrels a day (b/d) but buyers have not faced problems in markets that are adequately supplied. The August oil report from the London-based Centre for Global Energy Studies (CGES) says that with planned shutdowns at US refineries this autumn and a sharp increase in North Sea production due later in the year, 'the market...can cope with a temporary shortfall in Nigerian output'.

OPEC has not reacted to the events in Nigeria so far and is sticking to the quota of 24.5 million b/d. OPEC members have not attempted to replace lost Nigerian production by raising output. CGES says the OPEC states are intent on rebuilding their finances after the falls in revenue in 1992 and 1993 rather than running the risk of slowing the recent price recovery by boosting output.

OPEC's apparent restraint is contributing to a growing gap between supply and demand which has helped push up prices during the second quarter. According to the Paris-based International Energy Agency crude stocks were 18 million barrels lower at the end of June than at the same time last year.