Moody’s Investors Service expects crude oil price to remain elevated in the near term but to moderate over the medium term.
Releasing the Global Macro Outlook for 2018-19 August update, Moody’s Investors Service said they expect that the Brent spot price will average around 72 US dollars per barrel in 2018 and 71 dollars per barrel in 2019.
“Our oil price outlook is informed by our view that with today’s drilling and services costs, oil prices in the $50-$55 per barrel range are supportive for the vast majority of current and planned production,” Moody’s said.
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“Thus we believe that over the medium term (3-5 year period), oil prices will gravitate lower toward our medium-term $45-$65 per barrel price range.”
Eventually, higher drilling and services costs could push fundamental prices closer to the top end of 45-65 dollars per barrel range.
In the near term, however, Moody’s said a number of factors that have led the Brent spot price to move above 70 dollars per barrel (with the WTI at $3-$5 below Brent) will continue to support elevated oil prices.
Geopolitical risk and inconsistent production in countries like Libya and Nigeria, along with declining production in Venezuela, have added upward pressure on the price of oil, more than offsetting the downward pressure from a stronger US dollar.
According to Moody’s, other transitory events also play a part, such as the recent shutdown of the Syncrude facility in Canada or the strike by Norwegian oil workers.
“These drivers are likely to be short-lived, but will contribute to volatility in the oil market,” Moody’s said.
“The reimposition of US sanctions on Iran also adds a fair degree of uncertainty.”
Oil spot prices are inherently volatile. Robust global growth is ensuring adequate demand. Numerous technical factors affect oil spot prices both positively and negatively.
