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Oil Investing: Oil services under pressure

Posted January 24, 2008

"Despite attempts on the part of governments around the world to increase efficiency and stimulate domestic production, and efforts by consumers now shocked by gasoline costs well over $3 per gallon here in the States, global oil consumption is set to continue increasing in 2008." — Sam Hopkins

by Sam Hopkins, Energy and Capital

Baltimore – (TFN):  The deeper you go, the higher the pressure, and the higher the pressure, the higher the costs. I could be talking about plummeting world equity markets here, but today it's all about oil and oil service stocks.

Oil hit $100 recently, maybe as one trader's shot at Wikipedia immortality, and maybe because the geopolitical map of the world seemed completely ablaze at the end of 2007. Despite attempts on the part of governments around the world to increase efficiency and stimulate domestic production, and efforts by consumers now shocked by gasoline costs well over $3 per gallon here in the States, global oil consumption is set to continue increasing in 2008.

OPEC announced Tuesday that it maintains its 2007 figures for worldwide oil consumption at 1.2 million barrels per day (bpd), a 1.4% increase over 2006 levels. For 2008, despite a recession that has already been priced in to international stock markets and even depressed speculative activity in oil futures, the world's favorite cartel says we can expect another rise, to 1.3 million bpd.

So why are shares of major oil services firms — the ones in charge of building new rigs and drilling to ever-deeper depths offshore — plunging along with the Dow instead of staying buoyant? Read on to learn the answer.

***Sam Hopkins is a frequent contributor to Wealth Daily, a free daily newsletter full of investment research to help you build a lifetime of wealth, minus the risk. Find more of Sam's articles and market insight at Wealth Daily.

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