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Moody's Investors Service on Wednesday cut its near-term oil price forecasts for benchmark U.
S.
and global crude prices, arguing that a deep recession in the U.
S.
and other major economies ahead of the 2021 economic recovery will further reduce demand
for petroleum products.
This year, rating agencies have lowered their base forecasts for Brent crude prices to $35 per barrel and WTI prices to an average of $
30 per barrel.
Previously, Moody's price forecasts for Brent crude and West Texas Intermediate (WTI) were $45 and $40 per barrel, respectively
, in 2021.
The agency stressed that oil production will decline
in 2020-21 due to the OPEC+ deal, as well as the lockdown shutdown of the United States and Canada.
Elena Nadtotchi, senior vice president and senior credit officer at Moody's, said: "The exceptionally weak short-term prices will continue until production falls enough to ease pressure on storage facilities that are already at or near full capacity
.
In due course, substantial supply adjustments will help balance the market later in 2020, but the pace at which the market rebalances and oil prices rise will depend on the recovery
of demand.
”
In addition, Moody's medium-term price range for North American natural gas at the Henry Center, which is the primary benchmark for wholesale U.
S.
natural gas prices, remained at $2.
00 to $3.
00 per million British heat (MMBtu), as accelerated reductions in supply will help support the 2020 natural gas price recovery
.
Moody's stressed that financial risks are rising and that risk is likely to remain high
for everyone but the highest-rated oil and gas issuers.
"Low oil prices and inventory shortages will most directly hurt exploration and production (E&P) and oilfield service and drilling (OFS) companies, particularly lower-rated issuers that require significant financing
in 2020-21," Moody's said in a statement.
”
In addition, the agency highlighted that the refining and marketing (R&M) sector, currently hit by working capital outflows and low margins, will be the first to benefit from a pick-up
in demand.
Moody's Investors Service on Wednesday cut its near-term oil price forecasts for benchmark U.
S.
and global crude prices, arguing that a deep recession in the U.
S.
and other major economies ahead of the 2021 economic recovery will further reduce demand
for petroleum products.
This year, rating agencies have lowered their base forecasts for Brent crude prices to $35 per barrel and WTI prices to an average of $
30 per barrel.
Previously, Moody's price forecasts for Brent crude and West Texas Intermediate (WTI) were $45 and $40 per barrel, respectively
, in 2021.
The agency stressed that oil production will decline
in 2020-21 due to the OPEC+ deal, as well as the lockdown shutdown of the United States and Canada.
Elena Nadtotchi, senior vice president and senior credit officer at Moody's, said: "The exceptionally weak short-term prices will continue until production falls enough to ease pressure on storage facilities that are already at or near full capacity
.
In due course, substantial supply adjustments will help balance the market later in 2020, but the pace at which the market rebalances and oil prices rise will depend on the recovery
of demand.
”
In addition, Moody's medium-term price range for North American natural gas at the Henry Center, which is the primary benchmark for wholesale U.
S.
natural gas prices, remained at $2.
00 to $3.
00 per million British heat (MMBtu), as accelerated reductions in supply will help support the 2020 natural gas price recovery
.
003.
002020
Moody's stressed that financial risks are rising and that risk is likely to remain high
for everyone but the highest-rated oil and gas issuers.
"Low oil prices and inventory shortages will most directly hurt exploration and production (E&P) and oilfield service and drilling (OFS) companies, particularly lower-rated issuers that require significant financing
in 2020-21," Moody's said in a statement.
”
In addition, the agency highlighted that the refining and marketing (R&M) sector, currently hit by working capital outflows and low margins, will be the first to benefit from a pick-up
in demand.
