Recovery in Dubai crude price provides some relief to upstream producers in Q2

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Moody’s Investors Service says the recovery in the price of Dubai crude will provide some support to upstream oil companies, which have seen their margins contracting significantly over the past year.

“While oil prices remain weak, the recovery in the price of Dubai crude to $61.3 a barrel in the April to June quarter 2015 will provide some support to the earnings and cash flows of upstream oil companies,” says Vikas Halan, a Moody’s Vice President and Senior Credit Officer.

In particular, Moody’s expects that regional companies producing more oil or oil price-linked liquefied natural gas will likely benefit from the recovery in the price of Dubai crude.

“We also expect that investment-grade exploration and production players, particularly national oil companies, will be better-positioned to weather the cyclical downturn in the oil and gas industry, given their greater financial flexibility, stronger liquidity profiles and better access to capital,” says Rachel Chua, a Moody’s Associate Analyst.

Halan and Chua were speaking on the release of the latest edition of Moody’s Asia Oil & Gas Quarterly, a publication focusing on credit themes in Asia’s oil and gas industry.

Moody’s publication explains that Dubai crude traded at an average of $61.3/barrel (bbl) in the April to June quarter 2015; representing a 16.4% increase from $52.6/bbl in the preceding quarter, and ended the period at $60.9/bbl. The improvement was in large part due to the stronger demand for refined products.

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