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Moody’s: Outlook for global energy industry revised to positive on higher prices, recovery in demand

26 April 2021 17:36 (UTC +04:00)

The outlook for the global energy industry has been changed to positive from stable, Moody’s Investors Service says in a research published today, APA reports citing Malaymail.

A sustained uptick in commodity prices on the back of a recovering global economy is set to bolster a turnaround in industry fundamentals over the coming 12 to 18 months.

Moody’s maintains its medium-term commodity price ranges of US$45-US$65 (RM184-RM266) per barrel for oil and US$2.00-US$3.00/MMBtu for Henry Hub natural gas.

“Pent-up consumer demand and increasing trade and manufacturing activity as the Covid-19 pandemic is brought under control are driving a rebound in global economic activity,” Moody’s senior vice-president, Elena Nadtotchi said in the report.

“This, in turn, is quickening the pace of a recovery in demand for oil and gas through late 2021 and into early 2022.”

Favourable market dynamics and relatively low operating and offshore services costs will bolster exploration and production (E&P) companies’ earnings and operating cash flow in 2021 on the back of higher oil prices, Nadtotchi says.

Producers will focus on capital discipline and operating efficiencies in order to generate stronger free cash flow, pay down debt and strengthen their overall credit quality following a very difficult 2020.

Similarly, pent-up demand for travel and seasonally higher second- and third-quarter earnings in 2021 bode well for the refining and marketing segment through 2022. Moody’s estimates that global demand for refined products will rise by about 6 per cent this year, and by almost 4 per cent in 2022, it said.