ABSTRACT
The invasion of Kuwait by Iraq in August 1990 led, following the imposition of United Nations sanctions, to the loss of over 4.5 million barrels per day (b/d) of oil exports. This and consequent uncertainties about supply availabilities led to high and extremely volatile prices for both crude and certain products. An unexpectedly strong response in terms of incremental production by both non-OPEC countries and OPEC members (especially Saudi Arabia) led, however, to all the ‘lost oil’ being replaced. Although regional and product imbalances were present at times, by the end of 1990, total stocks had been built up to seasonally high levels and, in the absence of War Premia, the market would have been reacting to the stock overhang.
