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Fitch Ratings has revised its outlook for the global oil and gas sector to "improving" from "neutral", citing a sharp rise in oil prices triggered by supply disruptions linked to the closure of the Strait of Hormuz and stronger near-term earnings prospects for producers. According to the ratings agency, the sector is expected to benefit from elevated crude prices in the coming months despite ongoing geopolitical uncertainty in West Asia.Fitch said it has upgraded its 2026 sector outlook because higher oil prices are likely to support cash flows, profitability and credit metrics across the industry. The agency noted that the outlook revision reflects improved operating conditions for upstream oil and gas companies, even though the current supply shock is expected to be temporary. "The upgrade points to a windfall for producers from a supply shock that has lifted prices well above last year's levels," Fitch said in its report. The ratings firm has raised its average Brent crude price assumption for 2026 to USD 87 per barrel, compared with an average of about USD 68 per barrel in 2025. The revision is based on Fitch's assumption that disruptions to oil shipments through the Strait of Hormuz could persist until the end of July.
Fitch, however, cautioned that the current price strength may not be sustained over the longer term. It expects global oil markets to return to oversupply conditions once normal shipping activity resumes and production recovers.The agency said the closure of the Strait of Hormuz represents a temporary supply shock rather than a structural change in market fundamentals. It expects prices to decline sharply after the reopening of the key maritime route as additional supplies enter the market. "Global oil markets are expected to swing back to oversupply once the Strait of Hormuz reopens," Fitch said, highlighting the likelihood of surplus supply from September onward. The ratings agency also pointed to strong non-OPEC production growth and the possibility of further output increases from OPEC producers as factors that could weigh on prices later in the year. Despite the expected moderation in prices, Fitch indicated that the near-term earnings environment for oil and gas companies has improved significantly, supporting the revised sector outlook. The agency added that the current market conditions are likely to strengthen balance sheets and cash generation across much of the global energy sector. (ANI)
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