Latin American oil sector will start recovering in 2021

The rating agency Fitch Ratings estimated this week that oil and gas companies in Latin America will begin a trend towards recovery as of 2021.

That financial corporation based in New York and London, specified that the sector will begin its recovery after a 2020 marked by the impact of the Covid-19 pandemic on world economy.

Fitch estimates that crude oil prices could rise next year to an average of $45 a barrel, roughly 10 percent of what was expected in 2020, though still well below 2019 levels.

In its forecasts, it indicated that the demand for products in the region will revive, but its increase will be offset by a large underused production capacity, and a prolonged period of high oil inventory caused by the coronavirus pandemic.

It also forecast that the rating outlook will remain negative due to persistent macroeconomic challenges in Latin America.

Approximately 42 percent of the Latin American oil and gas sector has issuer ratings as government-related entities, representing a significant amount of outstanding foreign currency debt.

Meanwhile, demand for fuel is under pressure from rising infections in Europe, the United States and Latin America. As a result, the Organization of Petroleum Exporting Countries (OPEC) has said that demand will recover in 2021 more slowly than previously thought.

'In many ways, the market is looking to 2021, to a time when we do have vaccines in place, and to a time when OPEC and the allies have stopped some of those scheduled supply increases,' Lachlan said. Shaw, Head of Product Research at National Australia Bank.