OPEC raises oil quotas. In reality they are already pumping in the range of 27-28 million bpd, so the quota increase just matches reality now. On the otherhand, will the OPEC countries now pump another 10% higher? Highly doubtful. They don't want to cut their own throats by pounding down oil prices. If they produce 10% more oil but push down prices 10% they might as well have not pumped the extra 10%. In the short term fear and uncertainty usually mean LOWER oil prices, when reality and logic resume, we will once again maintain balance and stability. Also world oil consumption increases each year, so more oil is needed. Also, contracts are several months out (you sell your product for the next 6-12 months at a price set today),
so effects are not always felt immediately. What does this all mean to WRN? Well, in MHO not too much. Companies need rigs, and will always need rigs. You also don't run and plan for a company based on what oil prices will be for a small time frame. WRN is just starting up and is undervalued, so its not as though we will see our P/E ratio be lowered from 40 to 20, since we haven't released any figures yet. If WRN earned ONE THIN DIME annualy, we are currnetly trading at 5.5 times earnings, not too much downside I think.
REMEMBER, 7 weeks ago the oil sector was at a high, now after OPEC flexes its muscle, it gets hammered. One squawk by OPEC and the world reacts with fear, things will settle back down, and life will go on. If OPEC didn't "officially" raise their quotas, would the world oil price be affected? The OPEC countries don't want oil prices to fall its not in their best interests. Time will tell, but my guess is the next 3 months will be good for WRN as the fourth quarter develops, winter is traditionally good for oil prices, Jan-March has RRSP money flowing into the markets, and with interest rates being low, equities are more attractive to investors. Remember, you can't predict the future but stable oil prices benefit the OPEC countries, so while they may want a bigger piece of the OIL PIE, they won't slit their own throats, and world consuption is growing, and if absorbed properly should cause nothing SUBSTANTIAL in the oil world, other than
maybe a knee jerk reaction.
Steveo................. |
