Brent Crude has risen by over 40% in the last six months and is flirting with $70 a barrel while WTI is keeping up with it. Much fuss has been made of the OPEC-Russia production pact but the real driver appears yet again to be financial investors. Figure 4 shows the very sharp increase in long positions in the principal oil futures and options markets since last summer. Not all players in these markets are ‘pure’ speculators as oil companies and major industrial users regularly hedge forward. Even these levels are not high enough to create a surplus for most major sovereign producers: only Qatar and Kuwait are in the black, Russia and the UAE at around break-even while Nigeria, Saudi Arabia and other Gulf States are still struggling. Meanwhile, the US oil industry has been progressing, albeit with a few bumps along the way. Production is expected to reach ten million barrels a day, which is broadly comparable with each of Saudi Arabia and Russia; exports are rising and imports falling. Accordingly, the OPEC-Russia cartel in seeking to manipulate prices have effectively created competition. However, the extra productive capacity is likely to limit the extent of future price rises for everyone. Right now, financial investors are expecting higher demand as global economic activity continues to motor (pun intended) and the main beneficiaries of higher oil prices are the more efficient US oil producers and companies such as Schlumberger that provide services to them. This does not make the case for piling into any oil company, especially the majors. As ever, careful stock selection is necessary to avoid being burned if and when the financial investors change direction.