The price of oil will be pushed in two directions next week. That leaves aside the pressure that will come from a promised cut in supply by OPEC.
The head of Saudi Aramco, the state-owned oil company, said that at current crude prices it does not make sense to spend large amounts of capital on new and potentially difficult exploration. Put another way, the single biggest oil-producing nation is not bringing in enough money to extend the life of its fields.
According to Bloomberg, “It is clear that collapsing oil prices are not only detrimental to the economies of oil-producing states but also to future upstream investments to sustain future oil demand consumption,” Vienna-based consultant JBC Energy said in its weekly market report issued today.
To offset the problem in Saudi Arabia, new fields of tremendous size would have to be discovered elsewhere.
Brazil’s newest oil find may end up yielding as much as 100 billion barrels. That is more than the current supply in Russia and almost as much oil in the ground as Kuwait currently claims. If Brazil can tap all of this crude, it would make a significant increase to global supply a decade from now.
According to the FT, Haroldo Lima, head of Brazil’s oil industry regulatory body said, “Dimensions are so big that we still don’t have a good vision of what this means for Brazil."
What it means is that Brazil is the new Saudi Arabia.
Douglas A. McIntyre