Fitch sees oil prices in the range of $50-$100 a barrel

Global rating agency Fitch on Monday said, it expects oil prices to remain in the range of $50 to $100 per barrel, despite a fall in prices in the past few weeks. Companies, whose margins are under threat from high crude oil and gas prices need to be prepared for oil prices to remain in the range of $50-100 per barrel, Fitch said in a report.

Crude oil contract for October closed at around $109 a barrel on Friday from its all-time high of $147 a barrel. On Monday, US light crude fell by $1 to $105.23 a barrel, reversing gains of nearly $4 a barrel, as the dollar rose to its highest level against the euro since October.

According to Fitch, oil prices would continue to decline, particularly as the global economy slows. However, it does not anticipate that price levels seen in 2004 and prior, are likely to recur.

The report also noted that the oil and gas price environment over the last 18 to 24 months have generally benefited the oil and gas firms. Also, unprecedented high real wholesale prices has mostly led to a significant increase in cash flows and margins.

However, some firms without significant upstream exploration and production assets have conversely faced a significant margin squeeze. The financial performance of companies like Indian Oil Corporation and Sinopec of China has suffered significantly over the last two years.

This is because governments wanting to control inflation and maintain economic growth momentum have not allowed the companies to fully pass through the higher costs of crude oil to customers. Goldman Sachs analyst Arjun N Murti predicted last month that crude prices were heading towards a level of $150-200 a barrel in the next six months to two years.

While reasserting his view that crude oil was likely to remain strong in the near future, Mr Murti said in an interview with the American stock market weekly Barron’s, Goldman Sachs’ long-term forecast for 20 years was that the price could fall back to $75 a barrel.

“We have always assumed that at some point you get a sustained drop in demand. Our long-term oil forecast looking out 20 years is to fall back to $75 a barrel or some lower number,” Barron’s quoted Mr Murti as saying.

In a Goldman Sachs research note last month, Mr Murti had written that the possibility of oil price rising to $150-
200 per barrel level was increasingly likely over the next 6 to 24 months