Oil barrelsThe oil price has been creeping up, but if a warning from the International Energy Agency proves right, then it will do a lot more than creep up next year.

The oil price has risen sharply. West Texas Intermediate oil had increased from $44 a barrel in early November to just over $54 last week. It has fallen modestly since, down to $51. But most are expecting further prices rises next year.

The decision by OPEC and certain non-OPEC oil exporting countries to collectively cut oil production by just shy of two million barrels a day is the main driver of the changes.

But now the International Energy Agency (IEA) has warned that if all countries signed up to the agreement stick to their pledges, then the current oil surplus will turn into an oil deficit of around 600,000 barrels a day during the first half of next year.

In short, supply will be less than demand.

Now a deficit or surplus makes a big difference. Relative to global production, a 600,000 deficit is modest, but the fact there is a deficit is enough, the oil price may well shoot-up, and could pass $60, hitting inflation, and of course the cost of petrol.

On the other hand, there is an ‘if’ lurking.

This scenario only applies ‘if’ all the parties keep to their agreement.

In any case, so far they have only agreed to cut oil production until next May. The question then is will they agree to continue the cuts beyond that date?

The IEA says the outlook is uncertain.

All eyes turn to the US, fracking has been picking up steam, with the number of oil rigs in operation rising by 161 from 316 since May.

One thing is for sure. If the oil price does jump, that will be good news for Exxon Mobil, whose current boss, Rex Tillerson, is set to become US Secretary of Defence.