Moody’s Investors Service has raised its assumptions for oil and gas prices in 2014 and 2015, based on continued strong demand, rising political turmoil in the Middle East, and the impact of the severe winter in North America.
The rating agency said Thursday that it has raised its assumptions for average spot prices for the two benchmark barrels of crude oil, European Brent and West Texas Intermediate (WTI), and for North American natural gas. Moody’s notes that it uses price assumptions for rating purposes, they do not represent forecasts.
Nevertheless, it says that the new set of price assumptions reflects its sense of “firm demand for crude, even as supplies increase as a response to historically high prices.” On the supply side, it notes that “New violence in Iraq coupled with political turmoil in that general region in mid-2014 have led to supply constraints in the Middle East and North Africa.”
For North American natural gas, Moody’s says that prices will get a continued boost from a slow refill of underground storage following a severe winter. “The urgency of refilling natural gas storage will prop up spot prices for the rest of 2014. Still, abundant natural gas supplies will keep a cap on prices,” it says.
It now sees Brent crude at $105/barrel (bbl) for the remainder of 2014 and $95/bbl in 2015. For WTI crude, it sees prices at $100/bbl for the rest of 2014, and to $90/bbl in 2015. The new assumptions are $10 higher for both benchmarks in 2014 and up $5 for 2015.
It also increased the price assumption it uses for North American natural gas to $4.50 per million British thermal units (MMBtu) for the rest of 2014 and $4.25/MMBtu in 2015; which is up by 50¢/MMBtu in 2014 and 25¢/MMBtu in 2015.
It left its assumptions for crude prices and natural gas unchanged after 2015, at $90/bbl for Brent, $85/bbl for WTI and $4.00/MMBtu for North American natural gas.