The 2020 outlook for crude has improved a bit after Organization of the Petroleum Exporting Countries (OPEC) cut their production and we got the trade agreement said Vikas Halan of Moody's Investors Service.
Although the uncertainty has abated a bit, we are still not completely out of the woods yet. "We still have some uncertainty around US and what is going to happen and how it will impact the overall trade agreement that US and China has and how that will play into the demand sentiment in the region,” said Halan in an interview with CNBC-TV18.
“More importantly, we are concerned about the downstream and what happens to the product demand, what happens to petrochemicals because this region is not a producer but importer of crude oil and the downstream determines the fate of a lot of companies in the region," he said.
According to him, if economic growth picks up following the trade agreement, it definitely will be a positive for the downstream companies. "It should take a bit of a lag from the time we see improvement in crude prices till the time we get improvement in the downstream product and during that period, the refiners may make lower money because of crude prices going up and the petroleum prices do not," he said, adding that these are interesting times, and over the next six-eight weeks one would have to see how the crude oil price improvement plays out with respect to the downstream,” he added.
On the price front, he said, “We are focused on the downside risks and the they have definitely abated. We have been talking about USD 50 - USD 70 per barrel as a price range and that continues and won't be changing anytime soon." "We have maintained oil prices will be volatile. We don’t forecast oil prices but we do keep a range for the rating purposes and that continues to be USD 50-70 per barrel,” said Halan.
In terms of Indian demand growth estimates, he further mentioned, “This year the demand growth has been quite muted so far. We have seen a little bit of uptick in November but we are yet to see a sustained improvement on the demand growth."
"In 2020, I would say given that this year was weak, we probably would see demand growth because of the lower base effect and we might see a bit of a catch up being done if there is stimulus in terms of government spending or in terms of global economic environment getting better, we might see demand picking up in India as well.”