Analyst: Oil Market Needs OPEC To Take Action

Oil Industry In Need Of Action

Speaking as a guest on CNBC's "Markets Now," the oil expert pointed out that that the global oil market is once again oversupplied which puts pressure on OPEC members to not only agree on any action but stick to it.

"An oversupplied commodity market has a difficult time with price discovery so there is that risk you go back to $40 [per barrel of oil]," Gammel explained.

Consequences

He continued that if OPEC members fail to follow through, then the price of oil faces some serious downside risk.

The problem with any OPEC agreement is the fact that it doesn't necessarily represent the best interest of individual countries. For example, Saudi Arabia's government understands that there is a finite amount of oil it can extract, and the sooner it can sell it the better.

On the other hand, Gammel noted that Saudi Arabia's oil reserves can span decades, so there may be a need to balance a higher revenue stream per barrel of oil over the longer term.

Bottom line, OPEC needs to take action for any sort of price support in oil.

The United States Oil Fund LP (ETF) USO was seen up 1.96 percent at $10.43 in Thursday's pre-market session. Year-to-date, the ETF is down 7 percent, and over the last 30 trading days, it's down over 10 percent.