Wunderlich: Following OPEC Decision, 'We Enter The Brave New World'
Following Thursday's OPEC meeting in which the oil producing nations agreed to maintain its 30 million barrel per day output level, Jason Wangler of Wunderlich Securities stated that we are now entering "the brave new world."
"While one may argue this was a non-event, we would argue saying (or doing) nothing says (and does) a lot in terms of the going forward plans for the E&P and OFS spaces as now we have at least clarity on what oil prices should look like going forward," Wangler wrote in a note on Friday. "In the near term (aka yesterday), we saw WTI fall below $70 per barrel which is a four-year low and frankly this is likely the level that we as analysts, investors in energy, E&P and OFS companies likely have to plan for at least heading into 2015 and possibly beyond."
Wangler adds that Thursday's OPEC decision was "the last shoe to drop" from a supply side for oil and investors must prepare for a $70 per barrel world, a "brave new world indeed."
Wangler also states that it's "time to admit" that we are operating in a $70 per barrel oil world. While low oil prices helps the broader economy, it makes the energy trade and industry harder.
Finally, the analyst speculates that a more active M&A market "could emerge" and that the stronger companies will use the opportunity to make "smart" acquisitions for the future. On the other hand, there could also be some bankruptcy and distressed moves for companies that need higher oil prices and open capital markets.
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