A global credit rating agency says cuts to oil production by OPEC Plus members is a much-needed first step, but not enough to stem the pressures caused on the oil industry by the COVID-19 pandemic.
DBRS Morningstar says the historic cuts in crude oil production agreed to by OPEC and key non-OPEC producers should temper what they call the tidal wave of crude oil supply. The credit rating agency says the move also reunites the group as they attempt to bring some stability back to the market.
You can read DBRS Morningstar’s full commentary here.
Senior Vice President of Energy with DBRS Morningstar, Victor Vallance says the prospect for a short-term recovery in crude oil prices is unlikely, however. He says the recovery in crude oil demand and pricing will depend in large part on the reopening of economies once the pandemic abates.
He says assuming OPEC Plus holds to its promise to cut production through April, the overhang of inventory that has built up in recent months should draw down fairly quickly once the economies reopen.
He believes the price of West Texas Intermediate crude oil could lift to $50 US per barrel, (USD 50.00/bbl) which is in line with their midcycle oil pricing scenario.
