It appears that Brazil's state-run oil company, Petrobas, has discovered a huge undersea oil field. The oil field is estimated to be 33 billion barrels which would make it the third largest oil filed in the world. That represents an enormous increase in the amount of total marketable oil supply since this filed is previously undiscovered and untapped.
Of course news about oil typically means large shifts in the price of oil as traders (pirates) freak out. But this is good news and the futures markets should have reacted with a decrease in price since more oil in the FUTURE should mean a lower price. However, the price of oil actually hit an all time high since the announcement of this new oil cache. That makes a lot of sense doesn't it, does it? According to some experts the actual cost of getting a barrel of oil out of the ground in an established oil filed is as low as $10 a barrel. A far cry from the $100+ per barrel price being driven by the futures market.
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