Production Concerns to Send Black Gold Lower?

Oil prices fell this week off the back of a production concern out of Venezuela. The South American oil hub said that global supplies need to fall by 10% in order to bring production in line with consumption. In real terms that means that global oil production needs to cut 9million barrels per day (from their 94million produced), in order to match the consumption rate which is not rising to meet production despite low prices.

Technical market indicators are also weak at this time, which is adding to the likelihood that we are going to see prices around about the $42-a-barrel point in the not to distant future.

At the moment, nothing is pointing towards a production cull across the board, as many countries are continuing to produce at a loss in order to retain market share. With that in mind, we are going short in the markets, with an expectation that the prices are going to continue to drive lower for at least the next two weeks. As Heating Oil is tagged to Crude, we are expecting that to fall too.

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