Oil prices are expected to remain low for the next two years due to recession and uncertain demand, according to the latest analysis by a US-based integrated risk assessment firm.
Moody´s Investors Service predicts a lower price assumption for Brent, the main international crude benchmark for 2020 and 2021 presenting a longer relief for net importers of fuel like Kenya.
The firm predicts that Brent, which is what Kenya uses in determining the landed cost of fuel, will have its prices averaging $35 (Sh3,500) per barrel this year and $45 (Sh4,500) in 2021.
"Exceptionally weak short-term prices will persist until production drops enough to ease the strain on storage facilities already operating at or close to full capacity. Significant supply adjustments in due course should help to balance the market later in 2020, but the pace of the market's rebalancing and rising oil prices will depend on demand recovery," Moody´s Senior Credit Officer Elena Nadtotchi said.
The slight adjustments in prices are expected to come from reduced oil production. Exporting countries agreed to cut production to reduce oversupply.