Cheap oil is here to stay in 2015, and 2016 doesn’t look much better, Moody’s Investor Service says in a new analysis.
As FuelFix.com reports, the credit ratings and market analysis group says it had cut its U.S. oil price forecast to $50 per barrel in 2015 and to $52 per barrel in 2016. Moody’s put Brent crude, the global benchmark, at $55 per barrel in 2015 and $57 per barrel in 2016.
Moody’s says that the oil markets would eventually balance supply and demand around $75 per barrel for Brent, but reaching those levels might take until the end of the decade.
“Our forecast for world economic growth implies some increase in global oil demand, though not enough to keep pace with still rapidly rising production,” Moody’s analysts say in the report.
Global inventories will continue to weigh on prices, Moody’s says. Stores of crude in the Americas, Europe and Asia stood at 4.2 billion barrels in June, up from the 3.8 billion to 3.9 billion levels of the past five years. The excess inventory is roughly equivalent to 1% of global demand, Moody’s said.
A deal with Iran could also lengthen an oil price recovery. Iran’s oil production shrunk by about 750,000 barrels per day after sanctions were imposed in 2012, and some of that shortfall could be reversed within a few months of a final deal being reached.
“The possibility or the reality of higher Iranian exports will likely also weigh on oil prices in the next 18 months through at least early 2017,” Moody’s says.
