Daily Management Review

Fitch: most EMEA oil producers are ready for oil below $ 60 per barrel


04/11/2018


Most oil and gas companies in the EMEA region (Europe, Middle East, Africa) managed to significantly reduce costs, and this will allow them to keep the rating outlook at "stable" even if oil prices fall below $ 60 per barrel, according to the international rating agency Fitch Ratings.



SolvencyIIWire via flickr
SolvencyIIWire via flickr
"The majority of oil and gas producing companies are generally prepared for a scenario in which the price of oil will return to the range of $ 50-60 per barrel, and this causes a "stable "outlook for the ratings of most companies in our portfolio," the agency said.

According to the reporting for 2017, European oil majors as a whole had free cash flow from neutral to small positive with average Brent oil prices of about $ 55 per barrel against the background of measures taken to reduce costs. Russian oil companies also feel comfortable at this price level, as the weaker rouble and progressive taxation have smoothed out the volatility of their cash flows. The situation among the extractive companies of the rating category "BB" and below is more complicated, since much depends on the specific circumstances.

Deficiency of global production in 2017 contributed to the reduction of excess oil reserves and caused a rise in prices for Brent oil above $ 60 per barrel.

"At the same time, the situation may change during 2018, as we expect the continued growth in shale oil production in the US due to further efficiency and drilling volumes." We believe that the market will return to a moderate supply surplus, which will partially reverse the trend of stock reduction, and prices will return to the level of $ 50-60 per barrel, " Fitch analysts believe.

In addition, they are skeptical of the ability of OPEC and the countries that have joined the agreement to control prices in the long term.

"The price assumptions that we use in our forecasts are $ 57.5 per barrel for Brent crude and $ 55 per barrel for WTI, and we expect such price levels to continue in the next few years," the agency said.

Earlier in March, the Organization of the Petroleum Exporting Countries (OPEC) raised the estimate of world oil demand in 2017 to 97.04 million barrels per day (+20 thousand barrels per day), the OPEC report says. The forecast of world oil demand in 2018 increased by 30 thousand barrels per day, up to 98.63 million barrels.

In addition, OPEC revised the estimate of the growth rate of world oil demand: in 2017 - to 1.62 million barrels per day (+20 thousand barrels), in 2018 - to 1.6 million barrels per day (+10 thousand barrels per day).

At the same time, it is noted that OPEC countries in February reduced oil production by 77.1 thousand barrels per day by January - to 32.19 million barrels per day due to falling production in Venezuela, the United Arab Emirates and Iraq. OPEC output remained 314,000 barrels per day below the level set in November 2016 (32.5 million barrels).

source: reuters.com






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