Moody’s raises medium-term price band forecast for crude oil

PETALING JAYA: Moody’s Investors Service has raised its medium-term price band for crude oil to US$45-US$65 per barrel from US$40-US$60 per bbl, as continued Opec-led production restraint and strong global demand growth contribute to declining global inventories, offsetting rapid increases in US shale production.

The rating agency also raised the price band for natural gas liquids to US$20-US$30 per barrel, up from US$19-US$27 per barrel.

Moody’s, however, maintained its price band for North American natural gas at Henry Hub, the industry’s chief measure of natural gas prices, at US$2.50-US$3.50 per million British thermal units.

“Prices in the upper half of the oil price- band will encourage increased supply as US production grows and countries reduce compliance with their production quotas,” its senior vice-president Terry Marshall said.

Nevertheless, he said, even with crude prices at the higher end of the new US$45US$65 range in early 2018, the rating agency expects prices to stay within this range over the medium term amid better balance between increased production and growth in demand.

Moody’s noted that oil prices have firmed since the Organisation of Petroleum Exporting Countries’ November 2016 agreement to cut oil production by 1.2 million barrels per day (bpd), while nonOpec members, led by Russia, agreed to cut production by 558,000 bpd.