Moody's retains medium-term oil price estimates, raises natural gas, natural gas liquids

Moody's Investors Service will keep its medium-term oil price estimates at $40-$60 per barrel despite the extension of OPEC-led production cuts to the end of 2018, the rating agency says in a new report. Even so, Moody's has changed its price estimates for North American natural gas at Henry Hub to $2.50-$3.50 per million British thermal units (MMBtu) from $2.00-$3.50/MMBtu, and for natural gas liquids to $19-$27/bbl from $19-$25.

"Recent higher oil prices have been supported by global economic growth forecasts, production restraints and increased geopolitical risk," said Terry Marshall, a Moody's Senior Vice President. "But risks to prices persist, including reduced consumption due to higher prices, as well as increased supply."

Even with crude prices at the high end of the $40-$60 range in late 2017, Moody's believes prices will remain within that range through at least 2019 amid increased production, still-significant global supplies and modest growth in demand, Marshall says. Meanwhile, abundant US supplies of natural gas produced from shale developments, along with associated gas from shale oil drilling, will continue to constrain prices for US natural gas.

Moody's price ranges represent baseline approximations it uses to evaluate risk when analyzing credit conditions for companies in a number of industries and oil-exporting countries, and the rating agency periodically reviews its oil and natural gas price ranges to better estimate future financial metrics for companies and countries.

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