If there is a deal in Algiers, and it binds – with Opec holding together, and the Russians staying on board – then my end-of year oil prediction, in the absence of a Lehman-style global meltdown, will almost certainly come true.
Such geopolitical stargazing has helped push up oil prices this month. During the first week of August, short crude oil positions on the NYMEX, one of the world’s leading commodity exchanges, were at a 10-year high. A large number of traders, in other words, thought oil was set to fall back towards $30. That view has now been thoroughly trounced, with the resulting “short squeeze” helping to drive this latest 20pc oil price rise.
Aside from speculation and diplomatic wrangling, though, there’s growing evidence of an emerging supply-demand deficit.
Buried in the IEA’s latest report is the significant observation that it expects a further 900,000-barrel reduction in non-Opec output by the end of this year.
This Saudi-driven price war has seen global investment in oil exploration and field development cut by $300bn, some 41pc, since 2014. The “active rig count” – the number of wells being pumped worldwide, is down 37pc.
Before these trends are slowed, let alone reversed, oil will need to spend at least six months, and probably a year, firmly above $60 a barrel, if investors are to be convinced profits can be made, so persuading them to put serious money back into future crude production.
Unless global markets crash, I say that year of $60-plus oil will be 2017.