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Oil prices aren’t just high. They’re broken.
The latest monthly oil market report from the International Energy Agency, released Wednesday, shows that the price for one of the world’s most important benchmark crude grades, North Sea Brent, has surged back to nearly $120 (U.S.) a barrel despite the fact that spare production capacity at the Organization of the Petroleum Exporting Countries (OPEC) has risen substantially. Normally, rising excess production capacity puts a damper on prices – it has been a pretty reliable indicator of underlying supply-and-demand pressures. But in recent months, the price of Brent has all but ignored this signal, continuing higher even when it’s clear that OPEC producers aren’t strained in the least to meet market demand and make up for any temporary supply interruptions.