Oil Production: A Closer Look At The Global Hot Spots

Oil prices have pulled back from the century mark, but supply worries could help to keep oil prices near these heights. I’m keeping a close eye on the global hot spots that were major factors in crude surging nearly 60 percent last year – because they could be the catalysts for oil prices to pop or drop in 2008.

In a report out today, Robert Johnston, director of energy and natural resources at Eurasia Group, writes “it is likely that political factors--most notably OPEC” will be determining factors. But he adds:

“Mirroring economic worries that originated in U.S. housing markets and spread elsewhere, geopolitical worries are spreading and increasingly include events even in non-oil producing regions like Pakistan.”

While the decline in U.S. inventories helped propel oil prices slightly over $100 a barrel yesterday, it seemed to be in violence in Nigeria that initially triggered the run up this week – with militant attacks on New Year’s Day in the oil-rich region of Port Harcourt.

I’ve compiled a few stats on the Global Hot Spots that I’m watching for ’08.

OPEC member Nigeria produces a little over 2 million barrels a day, but is currently producing about 400,000 barrels per day below capacity, due in part to militant activity which has reduced output by about 20 percent since February 2006.

With oil production levels near 2.4 million barrels per day, Venezuelan crude output still declined for the fifth straight year in 2007. Since Venezuela nationalized its oil industry last May, production isn’t expected to improve much this year. Tony Mercandetti at Energy News Today Inc. tells me there are only about 60 active oil rigs in Venezuela right now and the country needs at least 80 rigs in production just to sustain current crude levels.

Surprisingly, concerns over what has been one of the hottest of the hot spots--Iran--have cooled considerably since the National Intelligence Report found the country has put its nuclear weapons program on hold. But keep in mind this country produces over 4 million barrels of oil a day--and it continues to enrich uranium, so Iran certainly is on my radar, though the possibility of a U.S.-Iran conflict seems less likely for 2008.

I’ll be keeping close track of U.S. oil supplies. I don’t really think we live in “hot spot.” But last week’s 4 million barrel drop put our nation’s oil inventories at the lowest level in two years.

Tradition Energy analyst Addison Armstrong tells me that puts U.S. oil supplies are about 3 percent from where they should be for this time of year. So I’m definitely going to watch our own crude stockpiles very carefully. You can too. Stay tuned to CNBC’s "Squawk on the Street" on Wednesdays at 10:30 a.m. to get the latest on the Energy Information Administration’s oil inventory numbers.

Questions?  Comments?  energysource@cnbc.com