The 12 May attacks in Riyadh, which killed dozens including many foreign citizens, caused renewed anxiety among oil traders that the events may damage supply from the world’s largest oil exporter. Those traders hoping to find some respite for their nerves were dealt a further blow as news from Iraq indicates that it will still be some time before Baghdad resumes oil exports. Production from the country’s main fields restarted in April: however, there have been no shipments since mid-March and there is no organisation or power in Baghdad with the legal authority to export oil. In a meeting in Moscow on 14 May, US Secretary of State Colin Powell failed to convince Russian President Putin to agree to the lifting of UN sanctions on Iraq. Under the Washington-proposed resolution, the US and its coalition allies would be able to sell Iraqi oil and use the proceeds without being subject to international supervision.

Despite ongoing overproduction by most OPEC members, oil inventories have continued to drop in the wake of the war in Iraq. Against expectations and seasonal precedents, US inventories have been falling at a rate of 900,000 b/d since the start of May, leading to a deficit of 57.5 million barrels relative to the normal seasonal pattern.

With crude oil imports to the US constrained by the absence of Iraqi output and gasoline purchases limited by availability and logistics, analysts warn that prices could increase further with the advent of the US driving season, a period of traditionally high fuel consumption.