BP (BP) last week said it found an oil field deep under the Gulf of Mexico that could yield as much as one billion barrels of oil and gas.
Not to be outdone, yesterday Brazil said its Guará offshore discovery could have two billion barrels of crude and gas. When this is added to the Tupi and Lara fields recently found by the Brazilian oil giant Petrobras, the total yield could be close to 12 billion barrels. It has been years since deposits of this size have been found anywhere.
The size of the BP and Brazil discoveries will add to the debate of whether global oil supply is dwindling and if this will cause prices to rise sharply over the next decade. Oil demand should lag well behind capacity, at least for the next year or two. The U.S. Energy Information Administration says that demand for crude will fall globally next year and supply will move up slightly. The agency cut its forecast for world oil demand growth in 2010 by 30,000 barrels per day. It increase its prediction of global oil production growth by 150,000 barrels per day.
These new fields come close to matching the largest deposits in Saudi Arabia and that should extend global capacity to produce large amounts of oil by several years. The fields are in extremely deep water, so it may need advances in technology to gain access to most of the crude, but if that works the aging fields of the Middle East may not pose the problems that have been anticipated until recently.
The long-term price movement of crude may be down. New supply coming online should be much more substantial than analysts have expected.
Douglas A. McIntyre
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