Brent crude has taken a beating over the last day or so falling $4 from 108.32 to a low today at 104.33.

Brent daily chart 02 04 2014

Brent daily chart 02 04 2014

Chinese worries are back in the frame as yesterdays HSBC manufacturing PMI number disappointed and continues to show contraction, and we’ve seen the appropriate response in oil falling. There’s also news that one of Iraq’s largest oil fields, which is one of the worlds largest untapped fields, began commercial production back on the 29th March and hopes to ramp up production from 120k bp to 400k bpd by the end of the year.

There’s also worries afoot about rising costs for big oil firms which may be putting the squeeze on profits. Per barrel development costs have nearly doubled since 2009 from $25 to $45 and the big oil companies are said to have been spending a lot more cash than in recent years. A fall in oil prices of 10 – 20% “could be a trigger for major financial crunches at numerous companies” reports Dave Frost at Oil.com

For some stupid reason I missed the short sell I was going to put on at the 108.30 level which has a great confluence of tech, and of course it’s since gone massively in my favour. I liked a long back down at my previous buy levels at around 106 but I’m thankful I left that alone. I also nearly bought in late yesterday at the 105.30 lows at the time, as I still like a long down towards 100. There’s not much in the way of tech down around here so I may see how it pans out. I might get a little trigger happy on a move down below 104 and start scaling in. 100 is the big psychological level and one where producers start to feel pain if it drops below. This funky chart shows the fiscal breakeven point for oil prices in OPEC countries for 2013.

OPEC oil breakeven point 2013 02 04 2014

OPEC oil breakeven point 2013

As you can see for the biggest producer (Saudi) we’re already into the top of their threshold and a dip below 100 may start seeing countries drop production levels to boost prices.

WTI has been on the receiving end also and has today broken down through the 55 dma. Below here is the 100 dma at 97.70 ahead of the March lows and support at 96.95/97.15. It also has a June 2012 support line at around 96.10.

WTI crude daily chart 02 04 2014

WTI crude daily chart 02 04 2014

I’m inclined to look for a long off the 100 dma and add to it on that June support line. Abreak of that will see me cover and we could see another run towards the 91 lows.