Bad News on the Front; Good News In the Back

Oil is trading at another record high today, after eclipsing $113 per barrel.  One driver of today's surge is a front page story in the WSJ highlighting that Russian oil production in 2008 is set to decline for the first time in ten years.  The article explains that "Declining production from the world's largest oil producer and one of its largest exporters puts further pressures on an already strained market and adds to the potential for higher prices for a global economy coping with a slowdown."

While the front page story of today's Journal focused on a 1% decline (approximately 100,000 barrels) in Russian oil production in the first quarter of 2008, not all the news is bad.  On page 14 of today's issue, the Journal ran a story highlighting a potential 33 billion barrels in new supply off the coast of Brazil.  If confirmed, the discovery would represent the largest ever new discovery of oil in the world.  Why the 100,000 barrels in decreased production made the front page, while the 33 billion in potential new supply was relegated to page fourteen is not clear, but net net, you would expect these two stories to have a negative impact on the price of oil.

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Comments

[Jaume]

This is a field similar to Tupi. Oil is about 30,000 feet deep, under miles of ocean water, salt and solid rock. Not easy to extract. However, it might be worth extracting for the right price.

[jonny q]

Its probably because one story is based on fact and the other one is based on speculation.