Fitch Ratings expects Brent crude oil prices to be around $45/barrel next year which would support a modest improvement in the credit metrics of most Chinese and south-east Asian national oil companies.
The benchmark oil price was recently hovering at $41/barrel, but has since then rebounded to close to $45/barrel amid hopes of higher demand because of promising results from covid vaccines.
Higher oil prices will help expand downstream refining margins, aided by aided by stronger product demand from world’s largest crude oil importer China and a gradual demand recovery in the rest of the Asian region next year.
“We expect gross refining margins to recover in 2021 from the near historical lows of 2020, but to remain below pre-pandemic levels. Healthy marketing margins should keep the credit metrics of state-owned Indian oil marketing companies in line with their Standalone Credit Profiles, though with limited headroom given their continued high capex,” Fitch Ratings said in a report.
It added that the majority of negative outlooks on Fitch-rated Asia-Pacific oil and gas issuers are driven by their sovereigns as most of them have strong state linkages or are key subsidiaries of state-owned National Oil Companies.
“We have seven issuers on negative outlook, which comprise one-third of our portfolio, of which four are linked to the Indian sovereign (BBB-/Negative) and one to Malaysia (A-/Negative),” Fitch said.
Members of the Organisation of Petroleum Exporting Countries (OPEC) are due to take a final decision on whether to extend production cuts. It was earlier expected to reinstate output, but are now likely to defer the decision because of weak demand conditions.
A fresh wave of coronavirus in the US, parts of Europe as well as other parts of the world have clouded the outlook for oil, despite promising results from vaccines.