Ratings agency Moody’s said in a report that global oil and gas prices are likely to remain volatile but range bound in 2019 on the back of multiple factors.
According to the report, the medium-term price band for West Texas Intermediate crude, the main North American benchmark, will be $50-$70 per barrel.
It said, “The December 2018 announcement that OPEC and Russia have agreed to cut production by a total 1.2 million barrel per day from October 2018 levels helps alleviate concerns about an oversupplied oil market, which had led to a more than 40 percent drop in crude prices in the past three months.”
Market expectations for continued strong oil demand growth of 1.4 mbpd have remained in place, despite concerns of slowing demand growth tied to weaker global economic growth, the impact of tariffs and a strong US dollar, especially in the emerging markets.
Very high Saudi and Russian production, mixed signals on Iran sanctions, and US presidential pressure on Saudi Arabia to maintain high production levels have all heightened supply volatility. The agency said that “The key questions for 2019 are whether OPEC and Russia will maintain production discipline, and what happens when the current agreement expires in June.”
However, it expects North American natural gas at Henry Hub — the chief benchmark for US natural gas prices — will average $2.50-$3.50 per million British thermal units. Also, natural gas liquids are likely to trade at roughly 45 percent of WTI, for a $22-$32 per barrel average.
According to Moody’s, the Exploration and Production (E&P) companies in 2019 will continue to exercise spending discipline and focus on capital efficiency. The Moody’s said that “While labour inflation has increased their operating costs, rising production has largely contained their costs per unit.
Higher demand for OFS has raised the costs of drilling and completing onshore wells, but efficiencies have helped most E&P companies offset some of these higher capital costs,” the report said.
Source : ET