The oil price is treading water today, failing to find a direction with some analysts believing that the recent down trend will continue on the back of bigger output from the US.
Oil is now down 20 percent since the start of the year and not even extended production cuts agreed to by Opec, and Non Opec members such as Russia, to remove excess inventories from the market, has been enough to stop the slide.
An even bigger problem now is the amount of oil being produced in the US, which is growing by the day and according to some has not been fully priced into the market and poses a real danger to the oil price,
“The other factor underestimated by OPEC has been the rebound in U.S. production from both the Gulf of Mexico and the shale producers. We have only just begun to see the shale output hit the market from the attendant rise in the U.S. rig count. U.S. production could hit 10 million barrels per day by year-end, from 9.3 million”
Analysts at JP Morgan also believe the price is going lower as history shows that even though Opec agreed to production cuts, not all members will be willing to comply and will simply release more oil to the market,
"By early 2018, the combination of record U.S. production and deteriorating OPEC compliance probably returns average prices to the mid-to-low $40s," they said.
Also with new technology coming on board, the amount of money to produce a barrel of oil becomes lower which will also prove attractive to US drillers,
"Rising U.S. output continues to stress markets, with increasing evidence that improved efficiency and technology makes many of the shale plays profitable below $40 a barrel," said analysts at Cenkos Securities.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.
|By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.|