By Geoffrey Smith
October 23, 2017

World oil prices hit recently their highest level in over two years. At the end of September, the commodity climbed to $59 a barrel ($58 in October), meaning the international Brent blend has more than doubled since the dark days of 2016.

The cause: A global glut is being absorbed as the world economy enjoys the most broad-based period of growth in a decade. The agreement on output restraint, struck last November by OPEC and other big oil-producing countries such as Russia, has already been extended through March 2017 and is holding. After ballooning in 2016, the developed world’s crude stocks are now—almost—back in their historical range (the OPEC deal’s key target).

Roderick Chen — Getty Images

Yet the rally remains unloved, and for good reason. For one thing, the high for Brent have been driven largely by speculative buying. For another, it included a weather-driven aberration: Hurricane Harvey took one-third of the U.S.’s refining capacity off-line, leaving domestic producers with fewer buyers for their output. After falling steadily since April, U.S. crude stocks rose by 15 million barrels in the first three weeks of September, according to the Department of Energy.

Above all, major improvements in efficiency have left the U.S. shale sector capable of turning a profit at anything above $50 a barrel. A sustained move higher will induce them to ramp up output, quickly bringing the market back into balance. Market jitters started immediately last week when Baker Hughes’ count of drilling rigs, a leading indicator of U.S. output, ticked up for the first time in nearly two mon­­ths. A balanced market can tip both ways.

A version of this article appears in the Nov. 1, 2017 issue of Fortune with the headline “We’re Having an Oil Rally. Absolutely No One Is Enjoying It.”

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