war in iraq


Fitch Raises Crude Oil & U.S. Natural Gas Price Forecast

Fitch's raises oil forecast to $27.00 from $24.00

March 07, 2003

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has raised its crude oil and U.S. natural gas price forecast for 2003. Its current forecast for crude oil is $27.00/bbl for 2003 and $21.00 for 2004; its forecast for natural gas is $4.50/Mcf for 2003 and $3.50/Mcf for 2004.

While Fitch believes that 2003 hydrocarbon prices will be close to the above forecast, Fitch rates companies based more on what it believes to be 'mid-cycle' types of hydrocarbon pricing. Nevertheless, Fitch expects that most oil and gas companies will experience excess cash flows (over cash expenditure and dividend requirements) this year allowing them to potentially reduce debt levels and improve their credit profiles.

On the oil side, Fitch's reasons for raising the forecast to $27.00 from $24.00 are as follows:

Currently, U.S. crude inventories are at 25-year lows and significantly below normalized levels. Given that recent imports of crude to the U.S. have averaged closer to 8 million barrels per day rather than the traditional 9 million barrels per day means that it isn't likely that U.S. crude inventories will return to a normal level anytime soon. This is probably the case even with an expected release of the Strategic Petroleum Reserve at the start of conflict with Iraq.

Nonetheless, Fitch believes that a relatively short, 'successful' conflict would bring crude down to the lower $20 per barrel range toward the end of the year. This assumption is based upon the belief that expectations in the trend of future supply/demand balance is relatively more important in determining prices rather aggregate, point in time inventory levels.

Source: Fitch Ratings


war in iraq