Oil prices were at their highest levels since 2014 in trading Monday, after the Organization of Petroleum Exporting Countries decided not to raise output.
In a meeting Sunday in Algiers, OPEC rejected U.S. President Donald Trump's call to open the taps, with both Saudi Arabia and Russia saying they won't produce significantly more oil.
On Monday morning, Brent crude, the main European futures contract, rose 3.3 per cent to $81.42 US a barrel at the close of trading. WTI crude, the benchmark North American contract, was up 2.1 per cent at $72.26 US a barrel.
Those are the highest prices since December of 2014, just before oil began its slide that took it down to $40 US a barrel in 2015, discouraging investment in the oil patch.
Oil prices have risen 20 per cent this year alone, pushing up the cost of gasoline and home heating oil.
JPMorgan predicts they will go even higher, perhaps above $90 US a barrel, in the near term. U.S. sanctions against Iran, the OPEC member that most wants to boost production, take effect Nov. 1 and could further tighten supply.
But Todd Hirsch, chief economist at ATB Financial, says he believes the price spike is short-term and could sink back by the end of the year.
"It's a bit of concern over global supply," he told CBC News. "I don't think it will stay in that range for long."
ATB is projecting an average WTI price of $66 US a barrel in 2018.
But that doesn't mean Canadian oil producers are getting that price for their oil.
Discount for Canadian crude
Western Canada Select, the Canadian oil contract, is also seeing a price jump, up more than $2 to $38.33, but the spread between WCS and WTI price remains wide, at close to $34, because of bottlenecks in getting the oil to market.
A lot of projects in Western Canada invested in expansion over the last few years, in anticipation of higher oil prices, Hirsch said.
The deep discount on Canadian oil is being driven by constraints in moving it to market, he said.
"There's not enough pipeline capacity and a lot of it is moving by rail," Hirsch said. If you can't get it out of the province, it tends to back up."
Mark Oberstoetter, an analyst with Wood Mackenzie in Calgary, said Western Canadian producers are not in a position to respond quickly to an improvement in world oil prices because of the difficulty in getting to market.
"Most of them plan out the next year in the fall and get their contracts in place. When the price rises, they're happy it happened, but there's been less hope because the spreads have widened," he told CBC News.
Wood Mackenzie also predicts the oil price spike will be short-term, but Oberstoetter says the overall increase in prices this year may encourage investment.
At the same time, some producers are pivoting away from gas and increasing their holdings in oil because gas prices have been poor.
Tariffs weigh on global stocks
Global stocks sank, in part because the U.S. and China officially placed new tariffs on each other's goods, a move that could discourage consumer spending and slow economic growth.
The OPEC governor, Hossein Kazempour Ardebili of Iran, said in comments to Reuters that Saudi Arabia and Russia were unable and unwilling to add more production at short notice.
"They are doing little and late, to get prices higher," he said. "They got prices higher and they are going to get them higher still."
Saudi Arabia successfully negotiated limits on oil production 18 months ago in an effort to get oil prices higher and boost government coffers, which had suffered from an extended period of cheaper oil.
This year the global economy has been expanding strongly, leading to growth in oil consumption and pushing up crude prices.
Trump had demanded OPEC get prices down
On Sept. 20, Trump sent a tweet demanding OPEC produce more to get oil prices down and thus boost the U.S. economy.
"We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!" he tweeted.
OPEC agreed to produce more earlier this year at Trump's request. However, Saudi Arabia and Russia now say they have no more capacity.
With files from Reuters, Associated Press
SOURCE: CBC NEWS