Drilling is expected to slow down as an increase in supply is expected to flood the market. (Source: Shutterstock)
Fitch Ratings changed its outlook on the global oil and gas sector from neutral to deteriorating on June 11.
The rating agency cited reduced oil demand growth on a weak economic outlook stemming from U.S. tariff policy, OPEC+ production increases and growing output from non-OPEC+ countries for the change.
Fitch revised its forecast that global oil demand would grow by over 1 MMbbl/d in 2025 down to approximately 800,000 bbl/d.
Drilling is expected to slow down as an increase in supply is expected to flood the market.
OPEC+ is adding more barrels to the global market for the third consecutive month with another 411,000 bbl/d for the month of July. Fitch said OPEC+’s shift in its voluntary cuts policy could be to penalize non-compliant members—or is a sign of “a growing willingness to defend market share,” which could continue to depress oil prices in the future.
The International Energy Agency is expecting the U.S., Brazil, Canada, Guyana and Argentina to collectively add 1 MMbbl/d to production in 2025, Fitch Ratings said. With a $61/bbl threshold to drill wells profitably, according to the March Dallas Fed Energy Survey, drilling could slow down, Fitch said.
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Fitch added that rising natural gas prices could partially offset the impact of declining crude prices. Decreasing oil output would likely buoy associated gas prices.
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