Moody unveils oil price forecasts for medium term

The large-scale market disruption from the coronavirus pandemic will unsettle long-term energy consumption patterns in the developed markets while heightening oil and gas price volatility, Moody's Investors Service informed, Report says.

According to the credit rating agency, the industry's uneven, extended recovery will depend on gradual improvement in demand as global economic activity picks up, particularly in the key consumer markets of China, Southeast Asia, and the US.
The report said that an extended oil price slump sparked partly by the pandemic will amplify disparities between stronger and weaker exploration and production (E&P) companies. It would mean that well-capitalized E&P companies and oil majors will consolidate US shale assets, and the universe of leveraged E&P companies will shrink substantially amid waning bank and investor support as a prolonged downturn further discourages debt investors from the E&P sector.

Another change that COVID disruptions would bring is that cheap fuel prices will no longer stimulate demand for refined products as a crude glut continues. A recovery in fuel demand will depend on economic growth and the market's strength for particular refined products, the report by the agency said.

Decreasing volumes of oil and gas will lead to an inflection point in the midstream sector's cash flow, as E&P customers slash capitals pending and renew or renegotiate contracts. Rising regulatory scrutiny will make it harder to win social licenses to build interstate pipelines and other large projects, slowing investment. Companies will increasingly need to finance themselves as capital access tightens," said the report.

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