Fitch Ratings has revised its price decks for both U.S. oil and natural gas, reflecting various market factors and underlying conditions.
Fitch has lowered its long-term (mid-cycle) Henry Hub natural gas price to $4.50/thousand cubic feet (mcf) from $5.00/mcf. This drop reflects limited catalysts for higher U.S. natural gas usage and the ongoing strength of shale-based liquids projects in North America, which has resulted in the treatment of associated gas as a by-product in a number of plays, allowing producers to tolerate lower all-in natural gas prices.
Fitch lowered 2012 HH base case prices to $2.75/mcf to reflect weak pricing seen YTD. While recent heat wave conditions have pushed electric generation usage up sharply this summer, this has been balanced against a very mild winter, which has led to average pricing of just $2.43/mcf as of the end of July.
Fitch has raised its 2012 base case West Texas Intermediate (WTI) to $92.50/barrel to reflect near-term market factors, and maintained its long-term base case price at $65/barrel.
Fitch’s price deck intends to reflect a more conservative view of future price levels for modeling and rating purposes and for evaluating future commodity price expectations from a bondholder perspective. Fitch’s price deck will often remain below current spot and future markets as a result. The price deck also reflects just supply/demand fundamentals, particularly the long-term price deck, with the recognition that near-term events can result in significant deviations from fundamental levels.
LNG World News Staff, August 16, 2012