Only the lowest cost oil reserves likely to be developed over 3-5 years: Moody’s


Only the lowest cost crude oil reserves are likely to be developed over the next three to five years, according to Moody’s Investors Service. It said that Brent crude prices are likely to remain in the range of $45-$65/barrel, while WTI (West Texas Intermediate) crude are likely to get $40-$60/barrel in the medium term. Moody’s said that the path to demand recovery is likely to be uneven that will lead to volatile market conditions next year.

At the same time, the Organization of Petroleum Exporting Countries (OPEC), OPEC+, and other producers will likely delay increasing their production in the first half of next year to match slower demand recovery.

US producers are also likely to increase their production only after oil prices above cash costs of production. A sustained rise in output will only occur after WTI prices recover above $55/barrel, Moody’s added.

Natural gas prices are likely to remain within a range of $2-$3 per MMBtu (Metric Million British thermal unit) in the medium term. Pure-play gas producers struggle to sustain production at prices below $2/MMBtu.

Reduced US production will help bring down inventories and rebalance oversupplied domestic market. However, the drop in production of associated gas that comes out with oil will pick up once WTI prices pick up above $50/barrel.

Despite a recovery, the EBITDA (earnings before interest, tax, depreciation and amortization) of integrated oil and gas companies are likely to be roughly 20% below that of 2019.Demand for refined products will likely remain below pre-pandemic levels, well into 2021, Moody’s projected.

The industry’s capital spending is unlikely to increase significantly next year compared to last year as near-term oil prices are likely to remain around $40-$45/barrel in the near term. Capital spending will continue at low level in 2021 after a 40%-50% decline last year. The upstream and downstream earnings and margins for National Oil Companies in Asia are likely to improve next year, but will remain lower than pre-pandemic levels, Moody’s said.

Biman Mukherji is a columnist and consulting editor at He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at

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