Crude oil prices will be mostly unchanged in the second half of 2015 and rise slowly in 2016, Moody’s Investors Service said while trimming its expectations for both years’ averages.
From earlier assumptions, the ratings firm lowered by $5/bbl each its expectations for average 2015 prices of Brent crude, to $55/bbl, and of West Texas Intermediate crude, to $50/bbl.
Those averages are based on second-half averages of $52/bbl for Brent and $47/bbl for WTI.
The new 2016 assumptions are $57/bbl for Brent and $52/bbl for WTI.
“Our forecast for world economic growth implies some increase in global oil demand, although not enough to keep pace with still rapidly rising production,” Moody’s said. It cited “a large build-up in inventories and the possibility that increased Iranian oil exports could reach global markets in the foreseeable future.”
The firm kept projected 2017 prices at $65/bbl for Brent and $60/bbl for WTI.
It also maintained its assumptions for Henry Hub natural gas prices at $2.75/MMbtu in 2015, $3/MMbtu in 2016, and $3.25/MMbtu in 2017.
It kept assumptions for NGL prices at $18/boe in 2015, $20/boe in 2016, and $22/boe in 2017.
Moody’s noted that oil inventories in June in the Americas, Asia, and Europe were 4.2 billion bbl. The excess over the 3.8-3.9-billion range over the preceding 5 years amounts to 1% of global oil demand.
“Although the US rig count has declined by more than half, it has been offset by a marked increase in average rig productivity,” Moody’s said. “Moreover, Saudi Arabia and Russia have increased production, in both cases to record high levels since the early 1990s.”
Moody’s expects no decline in global oil production before late 2015 at the earliest, “when the effects of this year’s investment cuts lead to less new production to offset existing declines and lower profitability leads to uneconomic production dropping at an increasing number of sites.”