Somehow, it’s difficult to picture hedge fund managers standing around their desks poring over maps of northern Iraq. If they were, Nymex crude oil would surely not be trading around $88 a barrel, another all-time record in nominal terms.

Say Turkey does invade Kurdish northern Iraq. Only a trickle of oil flows through the main pipeline linking the region to Ceyhan on the Turkish coast, anyway. Iraq does export around 1.5m barrels of oil per day – equivalent to perhaps 40 per cent of the world’s spare production capacity. But virtually all of that is produced and exported in the south. Crude prices were arguably already factoring in a $15-20 per barrel geopolitical premium. So while Turkish sabre-rattling does not help, neither does it explain the current spike.

The real battle is between speculators and the Organisation of the Petroleum Exporting Countries. Oil demand growth in the industrialised world remains anaemic and inventories remain above their five-year average. However, net long positions in crude oil contracts held by speculators have climbed sharply since late August, in line with oil’s renewed rally. Bulls argue that “global decoupling” prevents US economic problems harming growth elsewhere and that, in any case, the Federal Reserve will cut interest rates whenever markets wobble.

The first argument is untested; the second ultimately inflationary and, therefore, self-destructive. Yet in the absence of Opec following through on earlier promises to raise output to stabilise prices, who dares to sell short? Opec’s reluctance may be due in part to US weather officials forecasting a relatively warm winter in store. Yesterday, however, the cartel felt obliged to at least spell out its view that speculators were controlling oil prices. Such rhetoric often foreshadows a move to wrest control back by opening the taps. Without that, Opec risks volatile prices destroying real demand – as well as its own credibility.