One can look at likely rising oil and gasoline prices one of two ways. You can get frustrated, or you can profit from it by buying Schlumberger Ltd. (SLB), which is why I'm reiterating my buy rating for the company, first recommended on May 6, 2009 at a price of $56.09. If you bought SLB in May, you're up about 18%.

Some in the oil sector remain concerned about the recovery in demand for oilfield services. Based on the growth track for emerging markets, that concern is not warranted: the natural gas segment may encounter some head-winds, near-term, because in that energy commodity, the glut of supply has actually been matched by a low price. But oil? Forget about it. Business is booming: the supply glut of oil has done little to lower its price, which shows one the many roles oil plays (alternative asset, inflation hedge, weak dollar hedge) in the modern economy, to Schlumberger's benefit. The First Call FY2009/FY2010 EPS estimates for SLB are $2.71 to $2.81.

You can tell the oil market's in rough shape when companies are drilling more to pull in smaller profits. This is the situation in which Halliburton (NYSE: HAL) finds itself, with lower energy prices pushing down the cash that comes through the door.

So, its revenue was up for the most recent quarter, but earnings were down. The $262 million that came to the bottom line is 61% lower than the profit for the same quarter the year before.

OPEC oil ministers want to see a stable U.S. dollar and higher oil prices before they start to increase investment. OPEC maintains that because oil is priced in U.S. dollars it wants the U.S. to keep the dollar stable.

But these are secondary problems. The main thorn in OPEC's side is Russia. Russia has overtaken Saudi Arabia as the world's biggest oil exporter.

Unlike OPEC that is trying to keep a lid on production, Russia has increased production to a record 10 million barrels per day. Russia and other non OPEC countries were not invited to attend the OPEC meeting.

I'm reiterating my Buy rating for Murphy Oil (NYSE: MUR), first recommended on April 29, 2009 at a price of $47.80. If you bought then, you're up about 20%.

Murphy Oil remains the not-so-little-engine that could: Q2 upstream oil/natural gas production increased 18%, the company is on-track for 25-30% production growth in FY2009, and solid, double-digit gains in FY2010/FY2011.

The unemployment numbers just came out and showed that the U.S. economy lost 467,000 jobs last month. That was the trigger for the oil traders. Within a few minutes oil dropped $2.02 per barrel to $67.19 at 9:07 EDT.

Adding fuel to the decline was the report that gasoline stockpiles rose by 2.9 million barrels, but crude dropped 3.7 million barrels.

Oil moved up above $70 early in the session, but was unable to hold that momentum through the day. After its strong start to the day, prices dropped $2.19 to $67.83.

A major reason for the drop in prices can be attributed to the World Bank. The World Bank slashed its forecast for this year's global economic growth, and reported that the current recession is deepening.

Given oil's recent run-up, at times it appears that all oil/natural gas plays have been bid-up, but Devon Energy (NYSE: DVN) hasn't and it's worth a review.

Devon's shares were rudely treated by the Street from mid-2008 to early-2009, following the collapse in oil prices. Some of it was justified, due to the large, likely decline in FY 2009 revenue stemming from crude's price collapse. But valuing DVN with a p/e of 6 or 7 is a tad low, given the company's assets, hence the Buy rating that has been generated here.

Why is there conflicting information coming out of the oil patch? One minute we hear that there's an oversupply of oil sitting in supertankers offshore. Now Saudi oil minister Ali Naimi says that higher consumption in China is driving up prices. He further states that the world economy has recovered enough to sustain $75 to $80 per barrel oil. Is some of this just hype ahead of tomorrow's OPEC meeting?

We should keep in mind, however, that markets do not always move on fundamentals. Very often "perception" plays a bigger role. Prices have recovered from $32.70 in February to $63 per barrel recently. Much of this increase, even Mr. Naimi concedes, is due to speculation.

Earlier in the session we were looking at lower oil prices, but the mood has changed, and the precious crude is trading higher with the overall market today, picking up nearly 2.5% on the day.

Yesterday, despite rumors to the contrary, OPEC decided to leave its oil output alone, and this had the initial reaction of sending prices lower in early morning trading. With oil prices falling sharply since last summer, many analysts had been expecting to see a production cut from the group, but instead OPEC announced that it would be leaving its output unchanged, and stated that previous cuts were starting to take effect.

Put yourself in the shoes of the OPEC ministers meeting this weekend in Geneva. They will be sitting down and discussing the current supply/demand for oil in the coming months. The world is in crisis and OPEC has cut oil production several times over the past year. Now they must decide again what to do.

Here are some cold facts. OPEC expects oil demand to fall by 1 million barrels per day in 2009. That in itself is not so unusual, but now look at the one. Demand growth from developing countries is shrinking by 80% compared with last year. There is a glut of oil in storage and in tankers around the world, with estimates of a 57-day supply. This excess supply is unusually high by OPEC's standards.

Very often you can get a sense of the way a market is reacting by what is not happening. OPEC is meeting next Sunday to review their strategy in light of the current financial crisis. There is an indication that OPEC may not cut production this time around. Why is this?

Here are several reasons why we may see things stay as they are. First and foremost is that OPEC members "talk the talk" but they all do not "walk the walk." For example, Saudi Arabia has cut production by 16% since September but Iran cut its production only 4.3% and Venezuela cut its production by 8.3%. So as usual OPEC has difficulty holding each of its members to an agreed upon reduction.

"Long term, supply remains the key issue to watch in the crude oil market; depressed prices continue to force producers to scale back on exploration and development spending," says energy expert Elliott Gue.

In The Energy Strategist, he says, "I watch oil service giant Schlumberger (NYSE: SLB) as a gauge of overall health in energy markets; it has its hands in just about every imaginable oil- or gas-producing market on the planet."

"Schlumberger's fourth quarter earnings release and conference call were far and away the most bearish from the company in at least five years.

"CEO Andrew Gould was notably downbeat, particularly during the analysts' question and answer (Q&A) session. Predictably, earnings estimates have plummeted since that call.

There are two competing forces at work in the oil market. On the one hand, OPEC has already cut production by 4.2 million barrels per day since last September. OPEC's secretary has said the producer group was willing to make further cuts when it meets in March. The price of crude has been holding steady near (above or below) the $40.00 per barrel mark.

Another factor weighing on the market is the threat of some 30,000 U.S. refinery workers who may go on strike. This can bring our refinery capacity to a virtual standstill. In Britain, workers staged an unofficial walkout on Friday in protest over the use of foreign workers.

Oil prices are getting a big boost today, as investors are betting on hearing news of huge production cuts coming out of OPEC this week.

With oil well off its highs from over the summer, many had already been expecting to see OPEC step in and cut production, but earlier this month OPEC made it clear that it wants to shock the market into sending prices higher.

Prices have moved up over $50 a barrel today, hitting a high of $50.05, but have cooled off slightly and are currently sitting at $49.25, up $2.97 as we await to hear exactly how deep the production cuts could run.

OPEC members have not been in concert about when to cut production and by how much. The cartel's November meeting came and went. Nothing happened. Some members were accused of not following the September cut plan.

But, now crude is moving toward $40 and some of the producing nations are in real financial trouble. Russia, which is not a member, is also pushing cuts to bring prices back up, at least to the $60 level.

The financial pain of oil prices that are too low to make big money is about to force action by the cartel. According to Reuters, "There is an OPEC consensus on the reduction. But I can not tell you (more)," said OPEC President Chakib Khelil.

It was assumed before the November meeting that a production cut of two million barrels of oil a day would do the trick. Since then there have been reports that worldwide consumption of crude will drop for the first time since 1983. And, China is actually importing less than it has in a decade.

What happens now? It is anyone's guess, but a chop of 2.5 million to 3 million barrels a day in production would certainly not be surprising. If that happens crude could go up $20 in a flash.

Douglas A. McIntyre is an editor at 247wallst.com