The price of crude moved to a record above $112 overnight. It seems that speculation, a weak dollar, and concern about demand just keep pushing oil higher.
Now, oil is part of a "good news/bad news" play. Evidence is coming out of Russia that oil production there has peaked. According to the FT, "Russian oil production has peaked and may never return to current levels." By many measures, Russia is the world's second largest oil producer.
That bad news may be offset by a huge oil discovery off the coast of Brazil. The country's state-owned oil company, Petróleo Brasileiro, said it had made a huge discovery off-shore. According to The Wall Street Journal, "the head of Brazil's National Petroleum Agency, Haroldo Lima, said the strike could be one of the world's biggest oil discoveries in decades, containing as much as 33 billion barrels in oil equivalent."
The question now is whether one huge deposit can offset a decline in Russia and a fall-off in oil from other large producers like Mexico. For now, the answer is "no." That's because the Brazil discovery is in deep water. It could take several years to get it completely online. The decline in production in other countries is happening now.
The Brazil discovery brings hope, but no relief, at least no for now.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-15-2008 @ 10:46AM
Michael Schneider said...
The news from Russia is pretty bad and will be a problem for years ahead. The Wall Street Journal today did note that there could be more big offshore finds not only in Brazil but also in the Gulf of Mexico and Australia. The problem is so many of the big fields are maturing. Russia could see improvements in its tax situation which could increase production but costs seem to be rising everywhere--- it does call into question some of the efforts to reduce big oil subsidies in the US and it should start ringing some alarm bells in regard to the need to cut demand as the price alone hasn't done enough.
Dr. Michael Schneider runs several Web sites including http://www.Barrelomoney.com.
7-08-2008 @ 3:04PM
Wayne Neumann said...
Doesn't the big discovery in Brazil and the subsequent rise in oil prices tell us that a discovery in the Anwar would be met similarly by the market? Obviously an increase in supply should have an affect but it is not the panacea that W. would have us believe. It is also a sad/funny fact that many in this country believe that the new oil "we" might discover in the Anwar or OCS would be "our" oil and not be sold at the current market rate by Exxon or whomever found it. Hahahaha.