More Oil, Please?

It may have been a consummate effort to extract blood from a turnip. That, at least, is my assessment of President Bush's recent hat-in-hand request that OPEC pump more oil. And in a rather strange way, that contention may be augmented by the coming release of results by the likes of ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  ) , and BP (NYSE: BP  ) .

The difficulty, of course, is that, as I've written recently, with many big fields tiring across the world, it's questionable whether OPEC as a whole could raise its production even if it wanted to. Oh, sure, the cartel's kingpin, Saudi Arabia -- the place where the president issued his request -- has closed its spigot slightly and likely could add to its output. Indeed, I wouldn't be at all surprised if it did so.

Beyond that, Iraq has the potential to eventually ramp up the approximately 2.0 million barrels a day it's currently pumping, although we all know very well why that nation is producing at relatively low levels. But of the other big OPEC producers -- including Iran, Kuwait, Nigeria, and Venezuela -- none is producing at a rate comparable to its highest past level, and most have seen their daily output slip.

For similar reasons, I'll be interested to observe the production rates of the international integrated companies when they report their December-ended quarters in the coming weeks. I won't be astounded if, despite crude prices in the $90s for much of the quarter, the companies' upstream output was down, if only slightly.

If you're noting a theme here, you're probably right: As the president noted from Saudi Arabia, the growing demand for oil from places like China and India is sopping up larger amounts of global supply and affecting prices -- all at a time when, except for a few places like Russia and Kazakhstan, worldwide production may be close to topping out.

As a result, while crude prices have slipped recently and could continue to do so in the short run, I'm convinced that their longer-term trend has to be higher. On that basis alone, I continue to believe that, despite an average 20% gain in the sector last year, there are still opportunities for patient investors in energy. I'd still include among those opportunities the likes of deepwater drillers Transocean (NYSE: RIG  ) and Diamond Offshore (NYSE: DO  ) , along with big oilfield services provider Halliburton (NYSE: HAL  ) .

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