Oil Prices May See Little Growth Before 2018

Oil & Gas
Proshare - Facebook Proshare - Twitter Proshare - Linked In Proshare - WhatsApp

Tuesday, November 29, 2016/4:12 PM /Fitch Ratings

High inventories and the potential for US shale production to respond quickly to any market tightening mean oil prices may flatline in 2017 before gradually moving higher over the next few years, Fitch Ratings says.

We expect supply and demand to be broadly balanced in 1H17, with a move to a more pronounced deficit from 2H17. But the still-high commercial inventories may delay any significant price response. We have therefore maintained our base-case assumption, used when rating energy-sector corporates, that both Brent and WTI will average USD45/barrel in 2017.

We have also maintained our USD55/barrel assumption for 2018 and introduced a 2019 price expectation of USD60, reflecting our belief that it may take longer to fully return to our long-term equilibrium price of USD65/barrel.

But there is significant uncertainty about the future path of oil prices. Unprecedented capex cuts could translate into a far sharper fall in output than the consensus expectation, while there is also potential for demand growth to slow if economic growth disappoints or for supply to be higher than expected if US shale comes back strongly as prices rise.

Our price assumptions do not factor in any impact from a possible OPEC production cut agreement during its meeting scheduled for 30 November. This is because even if a deal is agreed, its ability to have a lasting impact on prices is unclear and will depend on the size of the cuts and the willingness of members to stick to them.

We have also lowered some of our assumptions for UK National Balancing Point gas prices, a proxy for international spot gas. We believe National Balancing Point prices will remain subdued for longer due to a medium-term oversupply of liquefied natural gas.

Related News

Why Mexico's Oil Reform is a Huge Opportunity for Investors
End Is Nigh For NNPC Joint Venture Model
Are The Saudis About To Reveal The Best Kept Secret In Oil?
OPEC's Bearish Report Provides Little Hope For Oil Markets
Average Kerosene Price Increases to N292.73 in Oct’16 from N288.68 in Sep'16
Disruptions to Oil Production
Average Diesel Price Drops to N187.25 in Oct’16 from N192.69 in Sep'16
Average Petrol Price Drops to N145.9 in Oct'16 from N146.3 in Sep'16
NNPC’s Accounts Show Operating Deficit of N11bn in August 2016
Can Oil Markets Survive An OPEC Implosion?
Uranium Exports Will Support Weaker Capital Inflows to Namibia
Oil Heavyweights Worry About Future Oil Supply
Militant Group Propagation Ensures Underperformance
Tesla, Apple and Uber Push Lithium Prices Even Higher
A Review of the FG’s Oil & Gas Enterprise
Rethinking the Oil Market
For How Long Can OPEC Talk Up Oil Prices?


Related News