In light of the fact that crude oil prices are up nearly 2% on Monday in the shadow of news that OPEC is aiming to cut production, one would think prices of oil stocks like Exxon Mobil Corporation (NYSE:XOM) and BP plc (ADR) (NYSE:BP) would also be up. One would be wrong, however. BP stock is down nearly a percent, while XOM is off by just a hair. What gives?

In simplest terms, most of the market knows better.

While the prospect of supply cuts and the subsequently higher oil prices that may foster is bullish for the industry, most owners of oil stocks know all too well we’ve heard this song and dance before, to no avail. Indeed, some OPEC member nations aren’t even verbally toeing the line this time around, even if only to appear as if they’re trying to work with the cartel.

Liken it to the tale of the little boy who cried wolf once too often.

OPEC Is Failing

This Wednesday, the 14-nation Organization of Petroleum Exporting Countries is scheduled to meet in Vienna, primarily to discuss cutting production of oil as a means of propping crude oil prices up.

After crude rallied 52% between February’s low and June’s high, most presumed oil was back on track. Oil stocks recovered as well. Since June’s high, though, oil prices have slumped 14%. In that same time, oil stocks have also lost an uncomfortable amount of ground in the wake of oil prices that are once again unprofitable for many U.S. producers.

While most OPEC member nations enjoy lower production costs than their U.S. counterparts and can weather lower prices, many of them (arguably too many of them) aren’t as resilient as widely presumed. That, or they’re simply less concerned about OPEC as a whole, and are opting to do their own thing.

Case in point: Iran and Iraq, which are OPEC’s second- and third-biggest oil producers, respectively, are reportedly already balking at the suggested 4.5% cut in output that would buoy oil prices for all producers — including non-OPEC suppliers. In the meantime, Libya has plainly said it has no intention of curbing its production, while Saudi Arabia’s energy minister Khalid al-Falih now sees little purpose in curtailing production.

With four OPEC members — and arguably four of the most influential ones — already rejecting the premise of the meeting even before the meeting starts, it’s unlikely that anything meaningful will transpire. Even if it does, compliance with the cartel’s decisions has been shaky at best.

Been There, Done That

If this discussion seems vaguely familiar, it’s mostly likely because the matter has surfaced before. In fact, the last time the issue firmed up was in late September, when OPEC agreed to curb output by about 2%.

It never happened … at least not yet.

OPEC’s production grew between September and October, to a multiyear high of 33.63 million barrels per day. The September accord placed the target production cap at 33.0 million barrels per day.

A mere matter of time to ramp down production? Possibly. One could also point out that September’s agreement was a relatively unofficial one, while this week’s will establish more concrete expectations. Again, however, four key OPEC members have already expressed varying degrees of resistance to any plans to cut production. They’re more interested in maintaining market share, even at the expense of margins.

Let’s also not forget that the last time OPEC successfully agreed to reduce production was in 2008, largely in response to boost prices that had fallen thanks to a global recession. It did exactly that, too, but only for three months. By mid-2009, production was ramping up again, with prices supported by rekindled demand.

And that may be the other innate flaw built into the premise of OPEC. Even when the organization successfully convinces members to curb output, the curbs tend to last only briefly.

Oil Stocks: Looking Ahead

For better or worse (worse, for most U.S. oil stocks), Saudi energy minister Khalid al-Falih was right about one thing: The energy market will balance itself out sooner or later. The question is, will that balancing entail the bankruptcy of more energy companies as a means of crimping supply? Realistically, the answer is yes, though to what extent remains unclear.

Either way, RBC Capital Markets’ Helima Croft may have the most alarming but realistic grip in the situation. She explained on Monday morning, “It’s (the production-cut debate) binary. If you get a deal done you affirm the case for 50 (dollars per barrel). Failure to launch, you’re below 40.” Above $50 per barrel, and most U.S. oil stocks are back in business. Below $40, and most U.S. energy companies can’t afford to stay in business.

Croft went on to say she’s not so sure Saudi Arabia — and presumably its peers — could shrug off oil prices at or below $40. If those countries are struggling, though, the U.S. players are almost certainly in even bigger trouble.

But that is right where OPEC wants to keep the United States and other global suppliers, even if the agenda for this week’s meeting suggests otherwise. It might simply be an unspoken but understood effort on the part of the cartel.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.