The oil price continued to pull back on Friday as more and more US oil drillers jumped on board to take advantage of higher prices and fill the whole left by Opec when they agreed to cut production.
The Baker Hughes weekly oil and gas rig count from the US showed that the number of oil rigs added was 15 marking the the 12th gain in 13 weeks and bringing the total figure to 566, the most in more than a year,
While the oil price remains above $50 a barrel, some predict that the number of rigs will increase even further which eventually will cause an oversupply and drag the price down,
"We're in a holding pattern at this point in time, supply is a big factor right now and you have the U.S. really filling that gap that OPEC has left open." said Mark Watkins, regional investment manager at U.S. Bank Private Client Group.
analysts at Commerzbank noted that the market was being driven by speculators at the moment who are ignoring the fundamentals and a sharp drop in the oil price may be on the horizon,
“The oil market is currently characterized by rather selective perception: bearish news such as the rising U.S. crude oil and product stocks is being ignored, as is the increase in U.S. oil production,” they mentioned in a note.
“Instead, even the most insignificant report of tightening supply, like yesterday’s news from the U.K.’s Buzzard oil field, is being seen as an opportunity to buy. Given that speculative net long positions in Brent and WTI are already at a record-high level, the correction potential is therefore growing all the time,” they added.