Meeting late last week at their headquarters in Vienna, the members of the Organization of the Petroleum Exporting Countries -- OPEC -- determined to stay with their current production levels. They won't say so publicly, but the current world price from crude seems relatively to their liking. The cartel won't meet again to discuss further production adjustments until Sept. 11.
The 10 members of OPEC's quota system -- excluding Angola and Iraq -- voted to keep their combined production at 25.8 million barrels per day. The organization's total production will be approximately 26.8 million barrels per day. With world usage slightly less than 85 million barrels a day, OPEC is producing nearly one-third of the total.
During the past few weeks, world crude prices have bounced between $55 and $60 per barrel, a level that apparently lies within the cartel's desirable range. It's still a substantial decline from last summer's flirtation with $80 a barrel. At the same time, we're about to enter a period of traditionally soft demand and declining prices early in the year's second quarter; the subsequent advent of the summer driving season typically lifts prices.
Among OPEC members, Saudi Arabia is easily the bigwig, with February production of about 8.6 million barrels a day. Iran follows at 3.8 million barrels, with the United Arab Emirates providing nearly 2.5 million barrels, and Venezuela contributing slightly less than 2.5 million barrels. Qatar brings up the rear in the cartel, with about 790,000 barrels produced per day last month. Iraq's February production slightly exceeded 2 million barrels, a healthy increase from its 1.66 million barrels in January.
I believe that Fools can draw two significant conclusions from OPEC's apparent recent stability. First, don't assume that stability's for real. Late last week, for instance, five key members of the United Nations voted to impose significant sanctions on Iran and its president, Mahmoud Ahmadinejad, as a result of that nation's refusal to cease its nuclear activities.
The resolution containing those sanctions now will go to the full 15-member security council of the U.N. Any retaliation by Iran could endanger that nation's healthy share of OPEC production. Production is also currently precarious in states such as Venezuela and Nigeria.
Second, I believe that as long as prices remain above $45 - $50 a barrel, the major and independent oil companies' planned exploration and production programs will almost certainly proceed undeterred.
Given all this, I'd be comforted if Fools included meaningful international energy representation in their portfolios. My choices, as I've noted in the past, would include ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), or ConocoPhillips (NYSE:COP) among the producers. In the ranks of the service companies, I would look at giant Schlumberger (NYSE:SLB), for its geographic diversity and technologies advantages, or deepwater drillers Transocean (NYSE:RIG) and Diamond Offshore (NYSE:DO).
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Fool contributor David Lee Smith does own shares in Schlumberger, but not in any of the other companies mentioned. He welcomes your questions or comments. The Motley Fool has a disclosure policy.
