OPEC Revival Looms Over Big Oil’s ‘07 Production Outlook

As major oil companies work to boost production in 2007, they’re experiencing fresh angst from an old rival: OPEC.

Responding to stumbling oil prices and concerns about falling demand, the Organization of Petroleum Exporting Countries has returned to the fore-front as a driver of oil markets, rendering two production cuts since Nov. 1 that have been implemented with varying degrees of compliance by its members.

The revival has generated anxiety on Wall Street, where analysts fret that a more activist oil cartel will prevent Big Oil from meeting production goals.
In the long term, Big Oil will have to get used to an OPEC-dominated landscape and executives count on helping the cartel increase its production when the due moment arrives. Non-OPEC production is poised for a major expansion in 2007 and 2008 as massive deepwater projects come on line in the U.S. Gulf of Mexico and Brazil, but many experts predict that this will be the last major such increase. In the future, OPEC countries will drive output growth, because they have the most abundant reserves, they say.

“All of our projections suggest that within a few years, we will need more OPEC production, and it doesn’t seem to me that this is something that we should be too concerned about,” said Chevron’s O’Reilly. “Our investments there are made in the very long term.”

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