What's going on?

The oil price dropped about 7% last week, to below $50 per barrel, as concerns over increasing US production, once again, weighed on the price.

What does this mean?

The oil price barely moved for the first three months of this year, enjoying a period of calm after OPEC, a group of oil-producing countries, agreed to limit their production � and thus boosted the oil price. But the past month or so has proved much more tumultuous, as the oil price has risen and fallen by more than 10% three times. The price appears to be driven primarily by the conflict between America�s increasing production and OPEC�s willingness to extend its supply cuts beyond the initial agreement (which is due to end in June).

Why should I care?

For the markets: It�s very difficult to predict how this will play out. (tweet this)

The acceleration of US oil output appears set to continue, as it�s profitable for US producers to ramp up drilling as long as the oil price remains in this general area. Whether or not OPEC will agree to extend its cuts remains unclear, although suggestions from Saudi Arabia indicate that it will. Another wild card is whether demand for oil will increase (many, including Goldman Sachs, think it will), which would be a positive factor for the oil price.

The bigger picture: The oil price tends to have an impact on overall stock prices.

It�s not always the case, but stock prices often move down when the oil price sells off and vice versa. For one, lots of companies are, of course, involved in drilling oil or servicing those that do � and their success creates more well-paid consumers for the wider economy to feed off of. In addition, if demand for oil falls (or doesn�t grow) it can be a sign of wider economic weakness (there are also other reasons too!).