Moody’s sees crude oil medium-term price at US$45 to US$65 per barrel
KUALA LUMPUR: Moody’s Investors Service (Moody’s) has raised its medium- term price band for crude oil to US$45 to US$65 per barrel (bbl), from US$40 to US$60 per bbl.
In a statement yesterday, Moody’s said the continued Organisation of Petroleum Exporting Countries (OPEC)led production restraints and strong global demand growth have contributed to declining global inventories, offsetting rapid increases in US’ shale production.
At the same time, it maintained the price band for North American natural gas at Henry Hub, the industry’s chief measure of natural gas prices at US$2.50 to US$3.50 per million British thermal units (MMBtu), while raising the price band for natural gas liquids (NGLs) to US$20 to US$30 per bbl, up from US$19 to US$27 per bbl.
Moody’s senior vice-president, Terry Marshall said prices in the upper half of the oil price- band would encourage and increased supply as US production grows and countries reduce compliance to their production quotas.
“Nevertheless, even with crude prices at the higher end of the new US$45 to US$65 range in early 2018, we expect prices to stay within this range over the medium term, amid better balance between increased production and growth in demand,” he said.
Moody’s analysts look to medium- term expectations as the most relevant price considerations in assessing financial performance and ratings for corporate issuers and oil-exporting countries.
According to the ratings agency, the emphasis on a range of outcomes within the price band helped in the assessment of resiliency to price volatility, and thus durability of credit ratings, for a given corporate or sovereign entity.
It said oil prices have firmed up since OPEC’s November 2016 agreement to cut oil production by 1.2 million barrels per day (bpd) and non-OPEC members, led by Russia, also agreed to cut production by 558,000 bpd.
Analysts noted that OPEC was fully compliant with its production restraint, with total cuts aided by Saudi Arabia exceeding its targets and Venezuela exceeding its targets due to domestic issues.
Marshall said this resulted in a decline in global crude inventories, which contributed to higher oil prices. — Bernama