Citing the impact of ongoing geopolitical tensions, Fitch Ratings is expecting higher oil prices over the next couple of years.
The rating agency raised its oil price assumptions for 2024-2025, saying it now expects it will take longer for prices to return to their long-run levels thanks to supply constraints from Russia and OPEC+.
“The market is likely to remain tight over the medium term, given fairly low spare capacity and increasing demand,” it said.
As a result, Fitch said it expects the wider differential between Brent crude oil prices and West Texas Intermediate crude prices to remain at US$5 per barrel through 2025, due to higher shipping costs and market volatility. By 2026, it expects the differential to shrink to US$3/bbl.
Despite the shift in its short-term view, Fitch said its long-term oil price assumptions remain unchanged.
“Our long-term assumptions reflect falling long-term demand due to the energy transition,” it said.
At the same time, Fitch reduced its natural gas price assumptions for 2023-2024, citing reduced demand in Europe, higher-than-average storage levels and its expectation that U.S. production will increase.