As global growth slows, Moody’s Investors Service has revised its outlook on the global energy sector to stable from positive for 2023.
The rating agency said energy company earnings will pull back from their record highs this year as the industry faces a slowdown in demand and rising costs.
“With growth in cash flow moderating, oil and gas producers remain unlikely to accelerate growth investment,” it said, adding that the rising cost of capital and higher regulatory costs will likely hamper investment too.
For refining and marketing companies, Moody’s said it still sees “robust earnings” in 2023 but a decline from this year’s record levels.
Despite the dimmer outlook for the sector, the report noted that Moody’s expects commodity prices to remain elevated next year.
“Restrained investment and rising uncertainty about the expansion of future supplies, plus a high geopolitical risk premium, will continue to support oil prices at levels exceeding our medium-term oil price range of $50-$70/barrel,” said Elena Nadtotchi, senior vice-president at Moody’s, in a release.
It also sees North American natural gas prices remaining high due to “significant dislocations” in the global natural gas markets and strong demand for U.S. liquid natural gas exports.