S&P Global – Oil and Gas Credit Outlook, 2024

The S&P Global Oil and Gas Credit Outlook for 2024 highlights several changes and key assumptions in the industry. Firstly, the outlook states that oil is facing downside risks as demand growth is expected to slow to 1 million barrels per day in 2024, compared to over 2 million barrels per day between 2021-2023. However, the report also mentions that balance sheets of producers and refiners have improved due to two years of strong prices and margins, leading to deleveraging. Additionally, mergers and acquisitions have increased, particularly in North America, indicating a desire for quality reserves and critical mass amidst the uncertainties of the energy transition. The key assumptions for 2024 include the expectation that OPEC+ will continue to support oil prices through production cuts, and global gas prices will remain stable. High inventory levels are anticipated to suppress U.S. gas prices, while the Title Transfer Facility (TTF) is expected to remain elevated but range-bound. Refining margins are predicted to remain strong but below the peak levels of 2022. The improved credit quality of companies is also seen as a factor that will help them withstand any challenges in 2024. However, there are key risks that could deviate from this baseline outlook. OPEC+ may change its supportive policies if oil prices decline, potentially aiming to gain market share and drive out higher-cost producers. Government intervention is also increasing, driven by factors such as producers' profits, energy affordability and security, and decarbonization efforts, which could introduce risks through regulation, taxation, and policies. Lastly, there is a concern that producers may worsen their financial discipline, increasing investments or shareholder returns only to face further price and cash flow declines, which could undermine the balance sheet strength they have built since 2021.