Oil prices may fall on oversupply in 2014, Moody’s says

HOUSTON — Slowing economic growth in China and rising oil production in the Middle East could hamper global oil prices in 2014, especially in North America, according to Moody’s Investors Service.

The bond credit ratings agency said OPEC countries may contribute to oversupply in global oil markets this year if they boost production above their expected 30 million barrels per day.

Moody’s, which made a number of market predictions for 2014 in a report released Monday, also said Chinese oil and gas companies likely will continue to snap up natural gas property overseas to meet its need for cleaner energy.

Foreign investment: China’s largest coal company to learn shale in US deal

China’s state-owned oil companies made the largest number of deals in the world’s $136 billion market for oil and gas assets last year, according to a report last week from IHS. And while China has been a prolific investor in North American shale plays, the country’s slowing GDP growth could put a dent in global oil demand and send prices down.

Moody’s expects Brent, the international benchmark crude, to average $95 per barrel and for U.S. benchmark West Texas Intermediate crude to average $90 per barrel this year. In 2015, both benchmarks are expected to drop about $5 from those projected levels.

North American pipelines

Meanwhile, Moody’s expects demand for oil and gas pipelines running between North American shale plays and markets to draw an increase in investment of 20 to 30 percent this year. The typical corporate vehicle for pipeline operators, master limited partnerships, likely will see a larger role in the energy industry as oil producers and refiners form more MLPs, Moody’s predicted.

Investors: Know the MLP pitfalls before putting money in

Investors, favoring the high yields that MLPs pay out, bet $5 billion on a dozen initial public offerings for midstream MLPs last year, including Phillips 66 Partners’ $378 million debut on the New York Stock Exchange in July. Shareholders likely will push drilling contractors with fleets of new oil and gas rigs to form MLPs, Moody’s said.

The credit rating agency said rapid growth in the midstream sector, however, runs the risk of leaving pipeline and other energy transportation assets stranded in the U.S. if demand for pipelines cools.

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