Moody's sees higher commodity prices, improved global energy demand

London (Quantum Commodity Intelligence) – Moody's Investors Service has upgraded its outlook for the global energy industry, citing a sustained increase in commodity prices and expectations for global economic growth to drive increased oil and gas demand over the next 12 to 18 months, reported Natural Gas Intelligence Tuesday.

Moody's said as vaccine programs are rolled out and coronavirus outbreaks retreat, increased travel should drive demand for oil, while greater commercial and industrial activity should boost demand for 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," said Elena Nadtotchi, a Moody's Senior Vice President. "This, in turn, is quickening the pace of a recovery in demand for oil and gas through late 2021 and into early 2022."

Moody's raised its outlook for the energy industry to positive from stable and maintained its expectations for 2021 oil and gas prices. It expects average prices of $45-$65/bbl for Brent crude and $2.00-$3.00/MMBtu for Henry Hub natural gas. Both oil and gas are currently priced at the upper end of those ranges, noted NGI.

Moody's said global demand for oil was 95 million b/d in March, "and will continue to expand to nearly 100 million b/d by the end of 2021, close to the pre-pandemic level of 101 million b/d" at the close of 2019.

"We expect that the OPEC-plus group of producers retains strong consensus and will continue to manage a gradual increase in production in step with the recovery in demand in 2021-22, while U.S. production levels are unlikely to rise significantly before 2022," the Moody's analysts said.