Moody's: oil faces oversupply risk

Moody's Investor Service, in its annual report, noted that the recent announcement that OPEC and Russia would cut production helps alleviate concerns about oversupply. The question, however, is whether both parties would maintain their production discipline and what might happen in June when the current agreement expires.

Further, it believes that US shale production will continue to grow, increasing global production and keeping a lid on prices.

Key points

Moody’s expects the West Texas Intermediate (WTI) crude, the main North American benchmark, to be in $50-$70 per barrel (bbl) range.

Believes prices will remain largely within our expected range —although they will be volatile—amid increases in US shale production, reduced but still significant global supplies, and potential declining compliance with agreed production cuts, especially if growth in demand is more tepid.