Analysts are pointing to the US gasoline market as the central factor driving prices up to the top end of OPEC's target band of $22-28 a barrel. Demand in Europe and Asia-Pacific is relatively weak, but improved weather in the US has kickstarted the holiday driving season. Tight refinery margins in late June discouraged a strong gasoline build, with the result that stocks in the week ending 4 July were 5 per cent lower than at the corresponding point in 2002 and stocks of reformulated gasoline were even tighter, 14.3 per cent lower than the previous year. Crude stocks remained almost unchanged at 282.2 million barrels.

'The market appears to have been caught napping on the gasoline situation,' says Paul Horsnell of JP Morgan. 'From the end of June, inventories would normally fall until the start of September, on average falling by about 20 million barrels from a base of 217 million barrels. This year, the end-June base was only 205 million barrels.' Matters have been made worse by the unplanned closure of a refinery unit in Texas.

The repeated lowering of expectations regarding the resumption of Iraqi exports continues. On 7 July, bids closed on the first tender for crude produced since the war. Eight million barrels of Basra Light from the southern Rumaila fields were on sale, taken in 2 million lots by ChevronTexacoand the Taurustrading house, both of the US, BPof the UK and the Royal Dutch/Shell Group. Loadings are to be staggered throughout July, balancing out at a monthly average of only 260,000 barrels a day (b/d). Exports from the northern Kirkuk fields appeared further off on 8 July, when news emerged of renewed sabotage on the main Kirkuk-Ceyhan export pipeline.

'It will take two weeks to repair if there are no new explosions, and we have several damaged areas on the pipeline that are still to be repaired from earlier explosions,' said a senior oil industry official.

The International Energy Agency's latest monthly report, released on 8 July, revised its timetable for output of 1.5 million b/d to 'later in the fourth quarter' rather than in the third quarter, blaming continued looting and sabotage of infrastructure.

However, fears that Nigeria would fall victim to another supply outage faded on 8 July as the general strike over fuel price increases was called off. The strike, which began on 30 June, had not affected exports, but the oil workers union had threatened to shut down oil facilities if an agreement was not reached within a certain timeframe, with the resulting uncertainty pushing up prices.