Persistently high oil prices could pose a growing threat to global economic stability as expensive energy and possible fuel rationing begin to weigh on economic activity and demand, Moody’s has warned. The rating agency said prolonged pressure in the oil market could eventually slow broader economic growth, even as oil and gas producers continue to benefit from stronger commodity prices.
Despite the risks to the wider economy, Moody’s expects earnings among exploration and production (E&P) companies and integrated oil firms to remain strong through 2026. Higher crude prices, combined with modest growth in production, are expected to support the financial performance of producers and strengthen their ability to manage debt and investment.
The agency’s latest assessment showed that credit conditions for global oil and gas producers improved during the first half of 2026. Moody’s upgraded 13 oil and gas companies during the period, compared with seven downgrades. The improvement became particularly noticeable in the second quarter following the outbreak of conflict in the Middle East, which pushed oil prices higher and boosted earnings expectations across parts of the industry.
E&P companies led the upgrade activity, recording six rating upgrades in the first half of the year, while oilfield services companies accounted for four and midstream companies recorded three. Twelve of the 13 upgrades came from companies in North and Latin America, with Moody’s attributing 11 of the upgrades to stronger company-specific credit fundamentals and two to acquisitions. However, the sector was not without challenges, as E&P companies also recorded three downgrades, including two distressed exchanges, while an oilfield services company filed for bankruptcy.
One of the biggest positive developments was the upgrade of Permian Resources to investment-grade status in April, driven by strong operations, reserve replacement, disciplined spending and expectations of faster debt reduction. Moody’s also identified Viper Energy and Antero Resources as potential future investment-grade companies. However, the outlook for the US oilfield services sector remains weaker, with subdued demand for onshore drilling expected through 2026, while international and offshore markets are likely to provide stronger opportunities. The warning highlights a delicate balance in the global energy market: high oil prices may boost producers’ profits in the short term, but if they persist for too long, they could put pressure on consumers, businesses and economic growth worldwide.
source: Leadership
