Why is oil shooting up at a time of year it traditionally falls off? I think I know why.

Crude-oil prices had managed to close above the $80 level for the past three trading sessions in New York, with the recent rally likely due to "speculative inflows into the futures market, given the lack of improvement in fundamentals," analysts at Credit Suisse said in a note to clients Monday.

OIL’S break through to $80 per barrel earlier this week was attributed to yet another bout of dollar weakness in forex markets, or a strong gasoline inventory draw-down in the US. But looking at the truly fundamental factors – the Organisation of the Petroleum Exporting Countries’ (Opec) spare production capacity standing at a whopping 5.5m barrels per day, global crude inventories still sky-high and a petrol-based product glut so severe that refineries are curtailing output – it is clear that only speculative pressure adequately explains fresh oil price hikes.

Despite the evidence of last year’s petromania, some still deny that speculation materially affects oil prices. CME Group, which runs the Nymex oil futures exchange and whose daily-traded front month contract sets the benchmark global oil price, recently objected to plans by US commodity futures regulator the CFTC to rein in financial sector speculation on that exchange.

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Recent indications are that these ambitions have been significantly watered down. Indeed, this may be why oil is now powering ahead again. The ongoing willingness of the financial investment sector to buy into oil prices – trading oil to satisfy their own concerns regarding dollar weakness and the bogey of inflation fears rather than giving any due regard to fundamental crude oil supply and demand factors – is certainly recognised as a key variable in near-term oil price forecasts by analysts.

Societe Generale’s global head of oil research Mike Wittner acknowledges that inflation/dollar concern on the part of financial sector investors is a key “non-fundamental” factor that needs to remain “constructive” in order for his $90 per barrel August 2010 oil price forecast to pan out.