Oil falls as Venezuela says market is 10% oversupplied

Oil prices dropped on Tuesday after Venezuela said that global supplies needed to decline by 10 percent in order to bring production down to consumption levels, and technical indicators also pointed to cheaper crude futures.

Global oil supply of 94 million barrels per day needs to fall by about a tenth if it is to match consumption, Venezuela’s Oil Minister Eulogio Del Pino said on Monday.

International benchmark Brent crude oil futures were trading at $45.82 per barrel at 0649 GMT, down 13 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were down 19 cents at $43.11 a barrel.

“Global production is at 94 million barrels per day, of which we need to go down 9 million barrels per day to sustain the level of consumption,” Del Pino said in an interview with state oil company PDVSA’s internal TV station.

Del Pino is also the president of PDVSA.

The statements came the same day as credit ratings agency Standard & Poor’s said that a proposed bond swap by PDVSA was a “distressed exchange” that would be “tantamount to default” if completed, a blow to the cash-strapped firm’s effort to seek a financial lifeline.

Technical market indicators were also weak, with WTI likely to test support at $42.78 per barrel soon, after which a fall towards $42 would be likely, according to Reuters analyst Wang Tao.

For Brent, he said prices may test support at $45.63 per barrel and, failing to hold that level, could fall to just over $45 a barrel.

Despite the bearish market mood on Monday, hedge funds scaled back some of their short positions in crude oil futures and options after prices failed to fall further, suggesting the market was running out of negative momentum.

Along with other money managers, they cut their combined short position in the three main Brent and WTI contracts by 36 million barrels in the week to Sept. 13.

Source: Reuters