Australia's leading oil producers are amongst the best performing shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) this morning following a rise in oil prices overnight.
According to CNBC oil prices jumped almost 6% on speculation that the Organization of the Petroleum Exporting (OPEC) will agree to cut production later this month in an effort to reduce the current supply glut.
Brent crude oil was up 5.6% to US$46.93 a barrel and WTI crude oil rose 5.8% to US$45.81 a barrel. A welcome relief for oil producers after prices dropped to three-month lows on Monday.
As a result Beach Energy Ltd (ASX: BPT), Oil Search Limited (ASX: OSH), Santos Ltd (ASX: STO), and Woodside Petroleum Limited (ASX: WPL) have all seen their shares rise accordingly. At the time of writing Beach Energy is the pick of the bunch with a 5.5% jump to 81.2 cents.
Whilst I am sceptical that OPEC will agree to limit output at its November 30 meeting, the market clearly believes it is a real possibility.
I believe if OPEC is able to come to an agreement to cut output then we will see a short-term rise in oil prices. That possibly sends prices beyond recent highs.
But a rise in oil prices is likely to cause more shale-oil producers in the United States to come on line, ultimately driving the price lower once again.
For this reason I see the oil industry as a very risky place to trade and certainly not a place to invest your hard earned money. Instead I would suggest investors look to other areas of the market such as the information technology or healthcare sectors.
