Oil price to be at US$40 in 2016, RM$45 in 2017
KUCHING: RAM Ratings presents today a commentary on crude oil price assumptions to be used in its assessment of the credit strength of corporates that have a tangible exposure to such prices as well as in its determination of sovereign ratings.
The disclosure of these assumptions aims to promote greater transparency and understanding of our credit assessments and is not an attempt to forecast crude prices.
RAM assumes average Brent crude prices of US$ 40 per barrel and US$ 45 per barrel for 2016 and 2017, respectively.
“We anticipate that the significant oversupply gap of about 2.0 million barrels per day ( b/d) at end-2015 will narrow slightly by mid-2016 and more significantly in 2H 2017 as the pace of global production slows against relatively resilient consumption,” says Kevin Lim, RAM’s Head of Consumer and Industrial Ratings.
“This is expected to provide a gradual upside to crude prices in 2H 2016 while a more significant uptrend is anticipated for 2H 2017, although prices remain constrained by oversupply and a substantial inventory overhang,” he adds.
In the coming months, Ram Ratings expect crude prices to stay volatile and pressured by significant uncertainties over supply growth as well as concerns about unsustainable consumption growth in major consumer markets.
Oil prices plummeted more than 75 per cent from the previous high of about US$ 115 in mid2014 to touch US$ 26 in January
We anticipate that the significant oversupply gap of about 2.0 million barrels per day (b/d) at end-2015 will narrow slightly by mid-2016 and more significantly in 2H 2017 as the pace of global production slows against relatively resilient consumption.
this year, in response to resilient robust growth in global crude production that has outstripped demand.
On the back of a decade of strong expansion in output of unconventional oils, largely from US shale formations, global crude production grew at the last two years.
Notably, the pace of output growth was almost double that of consumption growth over the same period.
RAM’s crude oil price assumptions are presented as full-year average prices for the current and next calendar year.
Subsequent to this maiden publication, an annual update will be published to renew the two-year crude oil price assumptions and/ or as and when our assumptions change.
Kevin Lim, RAM Ratings Head of Consumer and Industrial Ratings.