Baku, Azerbaijan, May 25
By Maksim Tsurkov – Trend:
Stabilization of oil prices in a range from $50 to $55 per barrel will lead to higher profitability for most of the producing companies, said Denis Perevezentsev, vice president-senior credit officer at the international ratings agency Moody’s.
He was addressing the Moody's Annual Azerbaijan Summit in Baku May 25.
Perevezentsev noted that Moody's has slightly changed the oil price forecasting technique and predicts the prices to be at $40-60 per barrel in the next three years.
“This is a quite wide range, but given the high price volatility we believe that in the next three years prices will vary within this range. The fall of prices below $40 is possible but is highly unlikely. Low prices do not allow companies largely invest in production, which leads to the increase in prices in any case. At the same time, we believe the prices will not rise above $60,” he said.
Perevezentsev also listed a number of risk factors for oil prices.
“The first factor is the production cut agreement itself. It is likely to be prolonged today until March 2018, as we expect. The second factor is the producing countries’ compliance with the terms of the deal,” he noted.
“Thirdly, a very important aspect is the production of oil by US companies. Against the background of stabilization of prices, production in the US has grown and continues to grow. In this respect, reserves may increase in the US which has a negative impact on prices. The fourth factor is a strong dollar which leads to decrease of oil prices,” Perevezentsev said, adding that positive risks include geopolitical events that occur or may occur in unstable producer countries.
Moody’s believes that the deal to cut production has favorable impact on the balance of supply and demand in the market, he added.