The oil price is hovering near a 4 month low today after data out shows production cuts from OPEC are failing to counter the effects of increased shale production in the US.
Earlier in the week some OPEC members threw the idea forward of extending production cuts in order to keep a floor under the price, but it has done little to stop the downslide.
When the cartel announced production cuts last year the oil price rebounded strongly as investors anticipated a shortage of supply but some say this time around the ploy won’t work. "OPEC is going to do their best to jawbone this market higher, but it seems the market is going to do its best to reject that," said Oliver Sloup, director of managed futures at IITrader.com.
"We think there won't be as much follow-through from OPEC as there has been in the past." he added.
Oil is now sitting around the critical $50 mark and any solid pullback is likely to see a bigger fall which is only likely to halt when the price becomes unattractive for US oil drillers and there is less competition in the market,
"There’s just too much oil out there," said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts, in a telephone interview.
"We keep being told the market will rebalance and we’re not seeing any evidence. It’s hard to maintain a bullish posture here." He added.