"Oil prices are set for only modest gains and will remain at lower end of our $45-$65 per barrel medium-term range, with uneven demand recovery and market rebalancing," the top rating agency said in a report on the 2021 outlook for the oil and gas sector.
The modest improvement in 2021 oil prices will lead producers to limit capital investment, with negative knock-on effects for drilling, oilfield services and midstream companies, while fuel demand will rise, but not to pre-downturn levels.
The report said the spending in new drilling will remain limited as producers will keep capital spending low , focusing on balance sheets, maintaining volumes and shareholder returns. Also, the downturn will promote strategic reviews as consolidation will continue among companies with higher credit quality and lower leverage.
Natural gas prices in 2021 - at benchmark Henry Hub - will stay largely within $2.00-$3.00 per million British thermal units (MMBtu) medium-term range. However, final decisions on LNG expansion projects face delays from oversupply, changing pricing models in Asia and rising competition from renewables.
