Stable outlook on upstream sector of oil and gas industry

Nov 12, 2001 01:00 AM

While hydrocarbon prices have declined, the upstream sector of the oil and gas industry has derived much benefit from the last two years of high prices for both oil and natural gas leading the international rating agency Fitch to assign a stable outlook to the upstream segment.
Prices for West Texas Intermediate (WTI) averaged $ 30.36 per barrel in 2000 and will average approximately $ 26.00 per barrel in 2001. Meanwhile, on the natural gas side, prices averaged approximately $ 4.29/mm cf in 2000 and will average approximately $ 4.00/mm cf in 2001. Prices during the last two years for WTI are nearly 50 % above their historical averages of $ 19/barrel-$ 20 barrel.
"As a result of current prices remaining in line with historical averages and current expectations of midcycle-type hydrocarbon pricing, Fitch has assigned a stable outlook for the upstream segment of the oil and gas industry," said Sean Sexton, senior director, Fitch.

The higher-than-average prices for the last couple of years were largely a result of constrained or restrained supply versus demand. For crude oil it was largely restrained supply courtesy of OPEC. On the natural gas side in the United States, it was constrained supply that was due to a lack of drilling in North America combined with rising demand.

Source: Fitch
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