As you might recall, on last Sunday's show, Bob had a caller that asked about the oil services stocks. Bob said there had to be a catalyst before he could see any upward movement in this sector. Well, since then we have had increases in oil prices and now we have OPEC meeting again next week to discuss oil producing cutbacks {see story below}. Of course, we have heard all of this before from the OPEC guys so the question is, is this just the same old tired story or is this the "catalyst" that Bob was talking about. I'm leaning towards same old story. What about you? Jeff
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OPEC Expected To OK Production Cuts
By BRUCE STANLEY AP Business Writer
LONDON (AP) - Now comes the hard part.
Saudi Arabia and other key OPEC members, which recently agreed to slash oil production by 2 million barrels a day, must find a way to back up their bold words with action to keep crude prices climbing.
Ministers of the Organization of Petroleum Exporting Countries, meeting Tuesday in Vienna, Austria, will be under pressure to honor the commitment if they are to end the global oil glut that has sent prices plunging to a 12-year low.
The conference is something of an anticlimax, however, since Saudi Arabia and other members announced March 12 after a meeting in the Netherlands that they had agreed with two non-OPEC exporters to slash production.
The meeting has ''had the wind taken out of its sails by prior agreement between some major players, and all that's left for the conference is to get some kind of ratification,'' said Leo Drollas, chief economist at the Center for Global Energy Studies in London.
If, as expected, the oil ministers formally approve the new output caps, analysts will be anxious to see whether OPEC can muster the will to enforce them, and for how long. Cheating on production quotas has been a chronic problem.
''Talk is cheap. Whether OPEC can really make these cuts remains to be seen,'' said Mark Redway of the London brokerage T. Hoare and Co.
The conference comes at a time of slack global demand for oil, due largely to financial turmoil in Asia and a mild winter that lessened demand for heating oil in North America and Western Europe.
Iraq has contributed to an excess supply of crude by exporting larger volumes under a U.N.-sponsored oil-for-food program. Iraq is barred from freely exporting its oil by United Nations sanctions imposed after its invasion in 1990 of Kuwait, a fellow OPEC member.
Overall oil inventories in January were only slightly lower than October's record level of 2.82 billion barrels, said David Knapp, editor of a monthly market report for the Paris-based International Energy Agency.
''Without some action,'' he said, oil tankers ''are going to start backing up at the ports because nobody wants them.''
The cuts agreed to by OPEC members would take effect April 1. Saudi Oil Minister Ali Naimi has said they would be added to existing OPEC and non-OPEC reductions of 3.1 million barrels a day set last June.
Cartel members Saudi Arabia, Iran, Algeria and Venezuela, together with Mexico, which is not a member, thrashed out the production-cut agreement, and Oman - also not a member - has committed to it, Naimi said.
''The surprise has been the willingness of Saudi Arabia to take the lead in initiating cutbacks,'' said Mehdi Varzi, an analyst with the investment bank Dresdner Kleinwort Benson.
Saudi Arabia would take the biggest production cut - 585,000 barrels a day, according to OPEC sources. At the same time, the kingdom seems to have accepted the argument that Iran should be allowed to make its cut from a base level of 3.9 million barrels a day instead of Iran's official quota of 3.6 million barrels a day.
This Saudi concession to Iran, the cartel's No. 2 producer, was the key to the agreement, analysts say.
Under the new quotas, which have yet to be made official, the 11 OPEC members would produce a total of 25.4 million barrels a day.
Crude prices have jumped almost $2 a barrel since the accord was announced, and some analysts foresee a possible rise to $16 a barrel by the end of the year.
On the New York Mercantile Exchange, crude oil for April delivery rose 24 cents to $15.46 a barrel on Friday.
''I think it's a bit premature, all this excitement,'' Drollas said.
Among the possible pitfalls to firmer prices would be a decision by Indonesia, Nigeria or Venezuela to break ranks and continue producing at current levels or beyond.
These three countries are seen as the OPEC members with the biggest immediate needs for money from oil sales, due to economic crises in Indonesia and Nigeria and the strength of oil worker unions in Venezuela. Yet each of them has apparently committed to curtailing production.
''I think they may have seen the wisdom of the longer-term deal,'' said Barney Gray, an oil analyst with the brokerage Williams De Broe. ''The second quarter's going to be tough, but perhaps by the end of the year, they'll start to see the benefits.''
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