OPEC Supply Decision Is Good News for Energy-Service Stocks

The Organization of the Petroleum Exporting Countries (OPEC) produces about 40% of the world's oil, and that makes decisions regarding their plans for production important to energy-service companies that rely on exploration and production (E&P) activity to make their money. Earlier today, OPEC decided to extend production cuts put in place one year ago through 2018. It also expanded the cuts to include two member countries that were previously exempt -- Nigeria and Libya, for those keeping score.

Extending production cuts might not sound like good news for energy-service companies at first glance because these companies benefit from production growth, not declines. But that's not necessarily true. Lower OPEC production is designed to increase oil prices, and over time, higher prices lead major oil and gas producers to reinvest more profit back into E&P, not less.

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Source: Fool.com