Background
The spectacular decline in the price of oil by 30% since June does not look like ending in the near future, according to the International Energy Agency. It has reported that tepid demand, a strong USD and booming American oil production, both conventional and shale, indicates that low prices are here for some time to come.
Speculators are naturally thinking ahead to a meeting in Vienna on November 27 where the 12 Organisation of the Petroleum Exporting Countries may decide to reduce production as an attempt to counter the price falls.
However, to have any effect OPEC will have to act with a genuine sense of unity. The IEA has said that it could see no evidence of a "clear consensus" from the Gulf states for a formal supply cut. As a result it suggests that there will be further downside pressure for the price of oil in the next few months.
Kuwait can balance its budget even if prices fall as far as $44/barrel; in contrast Iran needs prices at $130/barrel if it is to balance its national accounts. The Saudis are quite relaxed at the moment as their books will balance at $64/barrel but with reserves of $750 billion they can cover their national commitments for the next eight years.
The real issue is from the Latin American producer, Venezuela, which needs prices at $160/barrel. This is the highest of any OPEC member and there is widespread expectation that it may default.
This is having an impact on the oil majors and the Energy Index from Spotlight Indices illustrates a sharp corrective channel, the correlation of which to the oil price is R-Squared = 0.8917. It is estimated that the decline in the oil price since June is going to reduce capital spending by the oil majors by $40 billion. 
Management and risk:
Open a short on selected oil majors for a speculative play on further oil downside. Readers/followers should choose which oil majors they like least … I am working with Total SA down 12.36% in the past six months and for a touch of global reach ExxonMobil Corporation down 5.58% in the same period.
Parameters:
Entry: Short at 111.50 Targets: 109…108 Stop: 112.80 Time horizon: Medium-term
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