Moody's cuts oil price estimates as supply glut continues
TORONTO, January 22, 2016
Moody's Investors Service has reduced its price estimates for Brent crude and West Texas Intermediate crude amid continued oversupply in the oil markets and the risk of additional supply from Iran.
It has lowered its price estimate this year for both Brent crude oil, the international benchmark, and West Texas Intermediate (WTI) crude, the North American benchmark, to $33 per barrel (bbl), said a statement.
For Brent, this marks a $10 per bbl reduction from the rating agency's previous estimate, and for WTI, a $7 per bbl reduction, it said.
Moody's expects that both prices will rise by $5 per bbl on average in 2017 and 2018.
Terry Marshall, a Moody's senior vice president, said: "Opec countries continue high levels of production in the battle for market share, contributing to the current oil glut despite moderate consumption growth by key consumers such as China, India and the US.
"In addition, we expect the rise in Iranian oil output this year to offset or exceed production cuts in the US."
According to the report, 'Global Oil and Natural Gas Industry - Global: Increased Supply and Concerns About Demand Growth Drive Prices Yet Lower,' Moody's maintains its price estimates for North American natural gas prices at Henry Hub at $2.25 per million British thermal units (MMBtu) in 2016.
Moody's also maintains its price estimates for natural gas liquids (NGLs) at $12/bbl of oil equivalent (boe) in 2016, $13.50 per boe in 2017 and $15 per boe in 2018.
Ongoing increases in Opec oil production offset growing global demand of about 1.4 million barrels per day, according to the US Energy Information Administration, leading to a rapid build-up of oil inventories.
"Today's large global inventories will still take time to unwind and will continue to drag on prices even as demand picks up," said Marshall.
The Moody's price estimates are likely to be revised during the year based upon updated information on market fundamentals and futures prices. - TradeArabia News Service
