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Gradually rising prices are accompanying a gradual peaking of oil production and pointing to investment opportunity in buy-recommended oil and gas producers including ConocoPhillips (NYSE:COP), XTO Energy (XTO) and Occidental Petroleum (NYSE:OXY).

World oil production may have already peaked at about 85 million barrels daily (mmbd) where it has been stuck for the past year (see chart Global Oil Production, below). With current demand near 86 mmbd, the difference has been made up by declining inventory.

gas stocks

Gasoline stored in the U.S. is especially low (see chart from the EIA, U.S. Gasoline Stocks, above). The apparent peak may be tested later this year as both the IEA and the EIA, the well-known consuming country government energy forecasters, expect oil production to break out to a new high of 87 mmbd. Regardless, maintaining current production is enough of a challenge, we think, to propel a continuation in the recently renewed uptrend in long-term oil price now quoted at $68 a barrel.

oil production

Originally published on May 15, 2007

Source: Peak Oil Test Looming