Oil prices to remain range-bound between $55-65 per barrel

Oil prices expected to remain range bound at USD 55-65 per barrel due to a rise in supply from the US, debt crisis in Venezuela and the limited clarity on the sanctions on Iran, a report said.

"The crude price to remain range bound at USD 55-65 per barrel, driven by a rise in supply from the US, which would be offset, to some extent, by the recent production cut announced by the Organisation of the Petroleum Exporting Countries (OPEC), the continued debt crisis in Venezuela and the limited clarity on the sanctions imposed on Iran," the ratings agency India Ratings said Monday.

"Thus, the range-bound crude price would limit large inventory gains or losses. We expect the bulk of the subsidy to be borne by the government as against FY19, when the government, for a brief period, asked oil marketing companies to absorb marketing operations-related losses," it said.

The agency has maintained a stable outlook for the oil and gas sector for FY20 mainly on the back of healthy domestic petroleum product demand and petrochemical expansion by refiners.

The stable outlook is driven by continued strong domestic petroleum product demand, healthy gross refining margins, petrochemical expansion by refiners mainly to improve downstream value addition and rise in the usage of natural gas, it said.

However, the credit profiles of public oil and gas undertakings continue to depend on government policies on subsidy sharing, shareholder payouts, and large capex for refinery upgrade and expansion into new growth areas like the upstream and city gas and LNG distribution.

With regard to refining margins, Ind-Ra believes that the new regulation introduced by the International Maritime Organization against the use of high sulphur fuel oil is likely to lead to a shift in the product slate of refiners towards the production of more low sulphur fuel oil to meet new demand.

Meanwhile, reduced high sulphur fuel oil spread could have some negative implication on refining margins, it said.

As refiners globally are looking at breaking down a part of their petroleum stream into petrochemicals owing to the increasing penetration of electric vehicles, Indian refiners are also looking at such conversion, given the strong domestic polymer demand.

Ind-Ra also expects the city gas distribution business to witness strong momentum in FY20, given 78 geographical areas were awarded in the ninth city gas distribution bidding round and 50 more areas were tendered in the 10th round.

The agency further said that given a moderate increase in domestic natural gas production and priority allocation to the compressed natural gas and domestic piped natural gas connections, the demand from other sectors like commercial piped natural gas, fertilizer and power, is likely to lead to a rise in LNG imports, even as globally LNG prices remain strong.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)