Lower-than-expected natural gas inventories have led Moody’s Investors Service to lift its assumptions for North American Henry Hub natural gas spot prices by 50 cents to $3.50/MMBtu in 2013 and $4.00/MMBtu in 2014 and thereafter.

Prices had sagged in recent years as a shale and hydraulic fracturing boom and mild weather led to a significant oversupply, but prices have climbed in 2012 on coal-to-gas switching in the power generation sector and hot weather, and as companies have scaled back their dry gas drilling, Moody’s said.

Assumptions for natural gas liquids (NGL) prices remain unchanged at $34/bbl in 2013, 2014 and thereafter, pegging NGL prices at 40% of West Texas Intermediate (WTI) prices. NGL prices tend to follow crude oil.

The credit ratings agency assumes stress-case prices of $60/bbl for both Brent and WTI, $2.00/MMBtu for Henry Hub natural gas, and $24.00/bbl for NGLs. Price assumptions represent baseline approximations — not forecasts — that Moody’s uses to evaluate risk when analyzing credit conditions within the oil and gas industry.

Moody’s said it expects that world crude prices will remain strong, while a constrained U.S. market will result in a $15/bbl difference in 2013 between the two benchmark barrels of crude, European Brent and WTI. Moody’s now assumes that European Brent crude will sell for an average $100/bbl in 2013, $95/bbl in 2014 and $90/bbl in the medium term, beyond 2014. This presents a higher price assumption for Brent than the previous recent assumption of $95/bbl in 2013 and $90/bbl in 2014. The assumption for Brent beyond 2014 is unchanged.

For WTI, the ratings agency left its previous assumptions unchanged at $85/bbl in 2013, 2014 and thereafter.

Broad concerns about global economic growth and euro area sovereign debt will hold crude prices in 2013 and 2014 near their current levels, the ratings agency said. Greater efficiencies will also contribute to a reduction in exploration and production companies’ capital spending budgets in 2013, Moody’s said.

The firm said, however, that today’s historically strong oil prices face a number of risks, including a slowdown in China, worsening economic problems in Europe, and a return to U.S. recession if negotiations fail to resolve the “fiscal cliff.” In the meantime, heightening tensions and conflicts in the Middle East raise supply concerns, supporting oil prices.

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.