OPEC cuts haven't helped oil prices rebound yet. Russia is the largest non-OPEC producer of oil. Halliburton says if they curtail production significantly as well, oil prices could shoot up quickly.
From Halliburton Co.'s Q408 conference call: (HAL)
Declining oil prices have caused many of our customers to defer several of their international projects. We see the most volatile areas internationally to be the North Sea, Russia and exploration oriented projects. Some of you may be surprised to learn that our Russia business actually showed a 6% sequential growth from the third quarter. The growth came from continued adoption in Russia of our well construction technologies and was also bolstered by direct sales.
Operators have announced, however, a 25% decline in spending for 2009 and we expect to see some contraction of our business in Russia. However we continue to believe in the long-term prospects of this market and will align our business accordingly.
Despite negative demand trends it is worth noting that the industry supply issues impacted primarily by accelerating decline curves are more pervasive today than they have been in the past. Non-OPEC production fell in 2008 and is likely to decline in 2009. Russia, which accounted for the majority of the increase in non-OPEC production in the past decade contracted in 2008 and will likely do so again in 2009. Any period of under-investment driven by constraints in operator spending should lead to a resurgence in commodity price.
The industry will have to look to Venezuela too, like it or not:
Absent the major issues with respect to the current environment we have all been reading about I think that we will continue to see some expansion [in Venezuela].
Q: So you expect Venezuela for Halliburton and industry wide will be up year-over-year in 2009?
A: 2008 was certainly up year-over-year. I think the fundamental requirement is clearly there.
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