Why is oil getting more expensive?

Oil prices have continued to rise after reaching the maximum level for more than two years yesterday.

London Brent crude for November delivery LCOc1 was up 1 cent at $59.03 a barrel by 0621 GMT after settling up 3.8% on Monday. Earlier it rose to $59.49, the highest since July 10, 2015.

U.S. crude for November delivery CLc1 was down 10 cents at $52.12, after hitting $52.43, a five-month high.

Brent has jumped from just over $55 a barrel a week ago, as OPEC and non-OPEC producers confirmed the market was well on its way toward rebalancing, while oil inventories declined.

U.S. crude prices have lagged behind Brent’s gains amid a large oversupply exacerbated by Hurricane Harvey, which forced the closure of nearly 25% of U.S. refining capacity, Reuters reported.

An associate professor of the Graduate School of Corporate Management of RANEPA, Ivan Kapitonov, speaking to Vestnik Kavkaza, noted that Brent oil prices are unlikely to exceed $60 per barrel. "In the current price environment, it's hard to imagine that the threshold of $60 per barrel will be broken. I think that in the near future prices will go back to $55 per barrel, or even below this level. The information reason - a series of hurricanes and their consequences in the US - has already exhausted itself, and other information reasons for raising oil prices are not expected now," he explained.

According to his forecasts, Brent oil may return to the level of $55 per barrel already on Thursday. "I will clarify that the correction will begin this week. I think that tomorrow the price will be high, but by Thursday and Friday it will start to decline," Ivan Kapitonov expects.

First Vice-Rector for International Cooperation and External Communications of Financial University under the Government of the Russian Federation, the founder and CEO of the national energy security Fund of Russia, Konstantin Simonov, also linked the current increase in oil prices with news from the US. "In addition to the hurricanes, it is also a weakening of the US currency. Which in general corresponds to the policy of the United States, which under Trump's rule intend to support its shale companies, and for this purpose there is nothing better than rising oil prices. So, the fact that the price has reached $60 is the beginning of an uptrend," he said.

"With the appearance of shale oil in the market, the situation with pricing has changed quite seriously: the US can turn prices on and off: when a speculator reads that the United States is dramatically increasing the production of oil shale, it works on him. We should expect output growth in the States and Canada. Further, the milestone of 2017-2018 will be important, when Russia and Saudi Arabia will or will not extend the OPEC agreement," Konstantin Simonov emphasized.