Yesterday it emerged that Opec could not even agree when to hold an emergency meeting to discuss the crisis. Opec's president, Jean Ping, who is touring Middle East capitals in an effort to find consensus, said some countries wanted a meeting immediately but others favoured waiting 'for a more concrete element' to emerge from Iraq's talks with the UN on the resumption of oil exports. These talks could start again this week.
An Opec meeting was to have been held tomorrow, but was put off last Thursday when the Saudi government told Mr Ping that it would only highlight divisions between Opec members. The next day these divisions became painfully obvious when Riyadh accused Iran of breaking its production quota and fought back against a previous demand in the Tehran Times that the Saudis should cut their own quota.
This came at the end of a week of roller-coaster prices, which started with sharp falls on news that Iraq had agreed to UN monitoring of two missile testing sites. Peter Bogin, of the US-based Cambridge Energy Research Associates, said that there was no formal link between arms monitoring negotiations and those on resumed oil exports. But the market is convinced that, de facto there, is.
'It is not moving on physical fundamentals,' says Mr Bogin. 'It is completely in a psychological mood.' As a result, a breakthrough on either arms or oil could lead to a new price collapse. 'There is a serious threat the oil price will drop sharply. Brent could very easily go to dollars 15.'
This, in real terms, is close to the dollars 10 to which the oil price dipped in the mid-Eighties. It would not cause the same havoc as it did then because the industry is geared to operate at much lower prices, but it would still be uncomfortable for oil companies and oil-dependent regions such as the north of Scotland.
Iraq has not been allowed to export oil since it invaded Kuwait. However, the UN has always said the embargo would be partially lifted if the revenues were used for humanitarian purposes.
This has suddenly become more likely because, analysts say, the UN is short of funds and is prepared to weaken its demands. 'We are convinced Iraq will be back on stream by the end of this year,' said Paul Spedding, of Kleinwort Benson.
The alarm with which the market is viewing the return of a relatively small amount of oil - less than 600,000 barrels a day for six months, out of an Opec total of about 24.5 million - has much to do with its lack of faith in the cartel. 'Whether or not Baghdad is cleared to begin limited sales of crude oil, the world oil market is in a mess,' said Alan Marshall, of Swiss Bank Corporation.
In the face of recession-induced weak demand, Opec has been trying to persuade its members to cut production with a singular lack of success. Total production is reckoned to be 800,000 barrels a day above the agreed level of 23.58 million, while Kuwait is refusing to be bound by a quota. It says it will build up production from 1.9 million to 2.16 million barrels a day by September.Reuse content