Oil prices projected at US$40-US$60 until 2018

KUALA LUMPUR: Moody’s Investors Service expects oil prices to range between US$40 (RM177.20) and US$60 a barrel until at least next year.

It said Asian integrated and upstream companies should see their profits rise, on the back of the accelerated recovery of their upstream earnings.

“The improved oil price environment, as well as cost rationalisation, would provide an upside to earnings. We expect upstream acquisitions to increase, based on the announced divestment plans of global oil and gas majors in Asia,” said Rachel Chua, a Moody’s assistant vice-president and analyst.

In its latest edition of the Asia Oil & Gas Quarterly, a publication that examines major trends in the oil and gas industry in Asia, Moody’s said oil prices have firmed and held steady since the Organisation of the Petroleum Exporting Countries (Opec) November agreement to cut oil production.

“Opec has achieved roughly 90 per cent compliance from its members, that agreed to cut 1.2 million barrels per day (bpd), while non-Opec members complied with 50 per cent of their agreement to reduce production by 558,000 bpd.

“Even with these reductions in output, we believe prices will remain range-bound and possibly volatile amid significant global supplies, increases in US shale production and potential non-compliance with proposed production cuts, coupled with tepid demand growth,” it added.

As for the Singapore complex gross refinery margin, Moody’s said such margins would remain volatile this year, driven by continuing oversupply conditions in Asia, and the likely price volatility of the petroleum products’ feedstock.

“Specifically, Moody’s expects a healthy refining margin of US$5.0-US$5.5/bbl over the next 12 to 18 months. Such levels are in line with long-term average prices,” it said.

We expect upstream acquisitions to increase, based on the announced divestment plans of global oil and gas majors in Asia.

RACHEL CHUA Moody’s assistant vicepresident and analyst