Ver Angola

Energy

Moody's revises oil prices to between 50 to 70 dollars over the next two years

The financial rating agency Moody's on Friday revised the forecast for the price of oil to between 50 and 70 dollars a barrel, accompanied by an increase in production costs to pre-pandemic levels.

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"We have increased our estimate of the average price of a barrel of oil to between 50 and 70 dollars between 2022 and 2024 to reflect our expectation that the total cost of producing a barrel will increase in line with the recovery in demand", reads in a report on the evolution of the price of oil.

In the document, Moody's explains that it is "going back to the average price that was before the pandemic" and points out that "the conditional supply will continue to support the rise in oil prices".

For Moody's, investments in prospecting for new oil wells remain well below levels recorded before the pandemic, "despite the notable turnaround in oil and gas prices in 2021, and exploration and production companies are signaling that they will continue to restrict spending next year."

For countries like Angola, which face a structural decline in the exploration of reserves and limitations in prospecting for new wells, the investment of companies in the search for new oil fields is essential.

On Thursday, the Minister of Economic Coordination, Manuel Nunes Júnior, said at a conference in Chatham House that, "as a result of natural wear and tear on oil fields, operational problems, and the absence of timely enough investment in oil prospecting, physical production has been declining in Angola," with the oil sector falling 11.6 percent this year alone.

Moody's analysts estimate that companies "will need to significantly increase their spending over the medium term to replace reserves and avoid declines in future production."

However, for now, expenditure on exploration and production has only increased slightly from the 30 percent drop in 2020, with producers planning to "invest conservatively in 2022, driven by higher raw material prices".

OPEC's oil price broke the 80 dollars barrier this week for the first time since 2018, after the oil organization and its allies decided to keep production limited, the Organization of Petroleum Exporting Countries (OPEC) reported this Friday ).

The barrel used as a benchmark by OPEC - a basket of 13 types of oil, one for each member country - traded at 80.43 dollars on Tuesday, up 2.8 percent from the day before.

That rise to the highest level since October 10, 2018 came a day after OPEC and its allies decided, in a teleconference, to leave unchanged the existing plan to gradually and moderately increase oil supplies.

Led by Saudi Arabia and Russia, the 23 member countries of the alliance known as "OPEC+" have confirmed that in November they will add only 400,000 barrels a day of oil to the market, as they had already agreed in July.

With this, they will continue to leave much of the large production cut in place since May 2020, which they adopted to deal with the collapse in consumption and prices caused by the pandemic crisis last year.