Future Of Brazil’s Oil Industry In Serious Doubt

Oil market analysts keep a close watch on the weekly and monthly production figures from the U. S. EIA, watching for a sign that a contraction in output will help to balance global supply and demand.
There are a few reasons why so much attention is paid to the U. S., rather than other places around the world. First, the U. S. has consistent and reliable data, unlike a lot of other places, which makes analysis easier. Second, the U. S. is the principle culprit behind the collapse in oil prices, as its rapid run up in production pushed supplies well beyond demand. Third, U. S. shale, the source of the recent uptick in supply, rises and falls much more quickly than conventional oil fields, especially large-scale projects such as deep offshore.
Still, it is useful to pay attention to supply changes from outside the U. S. For example, in its November report, OPEC raises a few red flags on Brazil, where a deteriorating economy, a simmering corruption scandal, and a major pullback in the state-owned oil firm Petrobras, could all conspire to cut into Brazil’s oil output.
Brazil’s inflation has jumped to its highest level since 2003, running over 10 percent according to the latest figures. The central bank hiked interest rates to 14.25 percent, the highest in nine years to combat inflation, but so far it has been unsuccessful. Meanwhile, GDP is shrinking, with an expected contraction of 2.2 percent in 2015. And the unemployment rate has hit 7.6 percent, the highest since 2010.

This post was published at Zero Hedge on 11/17/2015.


Leave a Reply

Your email address will not be published. Required fields are marked *