The oil price is under further pressure today, racking up its 7th straight day of losses as concerns continue about the current oversupply in the market.
After the first round of production cuts by OPEC and Non OPEC members such as Russia, oil enjoyed significant gains, jumping by as much as $10 a barrel but all that started to unwind when more US oil drillers entered the market to take advantage of the higher prices. David Fyfe, chief economist at oil trader Gunvor Group says,
The premature bullishness we saw in early 2017 has had a reality check. The market has been a bit spooked by persistently high stocks.
It is estimated that only 70 percent of oil rigs in the US are functional at the moment which means a potential 30 percent more could enter the market putting further pressure on the oil price as more of the commodity hits the market. Tyler Richey, co-editor of the respected Sevens Report said,
Until the trend, and specifically the pace of rising US production, slows or reverses, it will be very difficult for oil prices to sustain any material gains in the medium term.
OPEC next meets in May, where they are expected to extend production cuts in order to shore up the oil price but there is no guarantees that Non OPEC members will agree to further reductions, and if a deal doesn’t go through, analysts expect the losses to keep piling up further.