Moody's slashes oil price estimates to $33/bbl as supply glut continues

Ratings agency Moody's has reduced its price estimates for Brent and WTI crude amid continued oversupply in the oil markets and what it deems as “the risk of additional supply from Iran.”

In a note to clients on Friday, Moody’s lowered its 2016 price estimate for both Brent and WTI crude to $33 per barrel. For Brent, this marks a $10 per barrel reduction from the rating agency's previous estimate, and for WTI, a $7 per barrel reduction.

Moody's expects that both prices will rise by $5 barrel on average in 2017 and 2018. Terry Marshall, Senior Vice President at the ratings agency, said, “OPEC countries continue high levels of production in the battle for market share, contributing to the current oil glut despite moderate consumption growth by key consumers such as China, India and the US.

"In addition, we expect the rise in Iranian oil output this year to offset or exceed production cuts in the US."

However, Moody's maintained its price estimates for North American natural gas prices at Henry Hub at $2.25 per million British thermal units (MMBtu) in 2016, $2.50/MMBtu in 2017 and $2.75/MMBtu in 2018.

Moody's also maintained its price estimates for natural gas liquids (NGLs) at $12/bbl of oil equivalent (boe) in 2016, $13.50/boe in 2017 and $15/boe in 2018.

Finally, the agency did attach a caveat to its latest assumptions saying the “estimates are likely to be revised during the year based upon updated information on market fundamentals and futures prices.”