Moody’s Investors Service has increased its medium-term oil price range to $50-70/barrel to reflect the rating agency’s expectation that the full cost of production of a marginal barrel of oil will keep increasing in step with a continued recovery in demand, Report informs referring to the agency’s press release.
Moody’s said that the upstream energy sector continues to invest well below pre-pandemic levels despite the sharp turnaround in oil and natural gas prices in 2021.
“Upstream spending has risen only slightly after a steep 30% drop in 2020,” the rating agency said in its report on the sector. “Producers are still planning to invest conservatively in 2022, but we expect modest spending growth on the back of high commodity prices.”
“Our analysis demonstrates that upstream companies will need to increase their spending considerably for the medium term to fully replace reserves and avoid declines in future production,” said Moody’s Vice President Sajjad Alam.
In May, Moody’s forecasted the average price of Brent crude oil at $58 per barrel for 2021, and $53 per barrel for 2022.