View from City Road: Don't write off the Opec collective

Is the two-year stretch of oil market blues finally coming to an end? The price of crude has fallen by around a third since the summer of 1992. Yesterday's 75 cent fall should have added further gloom, but it did not. Analysts seem convinced that it will be heading back up within a month.

As always in the oil market, there is a short-term and a long-term story. Short term, Opec no longer matters. Its meetings have failed to produce the goods for so long that no one expects anything. A year ago, a decision to hold the production ceiling would have been seen as a disaster. Now, traders shrug their shoulders, and analysts say 'we told you so'. They look to recovering demand, and to cuts because of maintenance in the North Sea, and believe the price will recover whatever the cartel does.

The long-term story may be old hat, but it is worth repeating. Opec members hold more than three quarters of proven oil reserves. Oil demand will rise 20 per cent in OECD countries, and will double in the rest of the world. Only Opec will be able to fulfil this demand.

Sheikh Yamani says there will be a 'price spike' before 2000. It would be foolish to forget him.