The limos pull up in Vienna and deposit their passengers at the latest meeting of the Organization of Petroleum Exporting Countries (OPEC). The world waits: Will the cartel's members go along with Saudi Arabia's desire to push up the group's crude oil quota by a half-million barrels a day?
Clearly, the reason OPEC's lead producer wants to push production upward is the roughly 35% hike that crude prices have undergone just this year. The difficulty with all this pomp and circumstance, though, is that in the final analysis, it represents lots of sound and fury that signifies almost nothing. The key is that most of the OPEC nations are already producing at pretty close to their all-out capacity.
First, for instance, there's Venezuela, which claims on the cartel's website to produce 3.1 million barrels a day. But with its President Hugo Chavez nationalizing everything in sight, such major world-spanning companies as ExxonMobil (NYSE: XOM ) , Chevron (NYSE: CVX ) , BP (NYSE: BP ) , ConocoPhillips (NYSE: COP ) , and Eni (NYSE: E ) have been given their walking papers. As a result, the Energy Information Administration (EIA) arm of the U.S. Department of Energy thinks that the country's daily output is probably down to about 2.4 million barrels.
And Iran, which advertises itself as producing about 4.1 million barrels a day, is thought to be at a rate closer to 3.9 million barrels. And more than 1.6 million barrels of that daily production are used in the country. As such, its money-making exports are about the same as that of Norway, which produces far less on a daily basis.
Also, The Wall Street Journal on Monday carried a not-to-be-missed article on the difficulties and delays in moving Iraq's production higher. But with a lethal combination of the 4-year-old war and ongoing internal political ineptitude, "Big Oil has remained on the sidelines..." Iraq, therefore, is paired with Nigeria as two cartel members whose crude production is being curtailed by hostilities inside their borders.
Clearly, Saudi Arabia can produce significantly more than its likely 8.6 million barrels a day. And Libya, which produces about 1.7 million barrels daily, has recently taken the encouraging steps of bringing in such Western companies as Royal Dutch Shell (NYSE: RDS-A ) (NYSE: RDS-B ) and BP in an effort to grow the nation's crude output.
But for now, talk about OPEC raising its output is essentially posturing that's akin to the Saudis talking to themselves. Given the likelihood that this situation will remain unchanged even in the face of increasing worldwide demand, Fools would be well advised to tend to the energy portions of their portfolios.
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