Commodity Corner: Oil prices could touch $260 a barrel in downside scenario, says Moody's

Talking about the outlook for oil, Vikas Halan, Associate Managing Director, Moody's Investors Service, on Friday explained the two likely scenarios of the Russia-Ukraine war -- that has led to a sharp surge in the commodity -- and how they could impact the prices.

In the first scenario, Halan said, the sanctions against Russia could continue for a prolonged period even if the conflict comes to a resolution. Halan says this scenario, which he calls the baseline, could see oil prices average around $120 in the second quarter of the calendar year while around $100 for the rest of the year.

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Talking about the second, which is "a downside scenario", which could be due to further escalation of the conflict, he said expansion of the sanctions which include Russia's energy sector more directly may see more elevated oil prices -- going as high as $260 for Q2 and then staying above $120 for the rest of the year.

On Indian companies, he said, “For the downstream companies what is good is they will benefit from higher refining margin that we are seeing right now. There will be hit on the marketing margins, they will benefit from inventory gains, but they will also be bearing the cost of higher working capital so a mixed picture.”

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