Crude oil was up again overnight after traders were caught by surprise by a big drawdown in inventories when they were expecting a build.
That saw the price of the US benchmark West Texas Intermediate crude oil futures contract trade up to a high of $51.93 before it pulled back a little to close US trade at $51.60 a barrel.
That’s the highest level for the Nymex WTI contract since July 2015.
Naturally, besides the weekly fluctuations of inventories, the price of crude is also being driven by plans for an OPEC/non-OPEC deal to cap production which is widely expected to be formally agreed on at the OPEC meeting in November.
While oil’s rise has been against this backdrop, there are many commentators who are still skeptical that a deal can be done. But Henry Jennings, an analyst at Marcus Today and former head of proprietary trading for Macquarie Bank, says the oil price will keep rising because “there is no one in the world that wants the oil price to go down”.
Sovereign nations want it higher. OPEC wants it higher. Russia wants it higher. Governments want the inflation it brings. Oil companies want the profits. The Saudis want to sell ARAMCO. The US shale producers want to frack until they bleed.
Who wants a low oil price? Consumers? Probably not as the inflation is supposed to push up inflation and so wages.
The Saudi plan to squeeze out the US frackers, grab market share, and freeze Iran out of the game hasn’t worked well, so now “we will see the continual squeeze higher of prices over the medium term”, Jennings says.
If Jennings is right, and I have to agree with him 100% on this, then the price of oil will rise a little further and along with it, the globe will get an inflationary pulse.
And that’s exactly what the globe needs right now – a little more inflation.