A promi­nent rat­ing agency's pre­dic­tion of a drop in glob­al oil prices could have se­ri­ous im­pli­ca­tions for the T&T econ­o­my since the na­tion­al bud­get is based on an oil price of US$80 per bar­rel (bbl) for West Texas In­ter­me­di­ate (WTI).Lon­don-based Fitch Rat­ings, in an analy­sis pub­lished yes­ter­day, said Brent oil, which gen­er­al­ly trades US$10 bbl high­er than WTI, could fall as low as US$80 bbl.

"The no­tion­al floor is well be­low the US$100/bbl lev­el that many mar­ket par­tic­i­pants thought was here to stay ear­li­er this year."But in the last two weeks Brent crude has fall­en–and stayed–sig­nif­i­cant­ly be­low US$100/bbl, and WTI crude has fall­en be­low US$90/bbl for the first time since 2012. The dif­fer­ence be­tween the two bench­marks has shrunk to around US$2.50, and for­ward curves al­so in­di­cate weak­ness," Fitch Rat­ings said.

"In the short term we con­sid­er a resur­gence of sup­ply dis­rup­tions and pos­i­tive ac­tion from Opec the most like­ly cat­a­lysts for a re­bound in prices. But with­out these, fur­ther de­clines might be pos­si­ble, es­pe­cial­ly if ev­i­dence grows of fur­ther weak­en­ing of glob­al de­mand or in­creas­ing Opec spare ca­pac­i­ty."

The agency said con­di­tions for an oil price high­er than US$100 bbl in­clude "grow­ing de­mand, tight Opec spare ca­pac­i­ty, in­creas­ing cost of sup­ply, par­tic­u­lar­ly com­bined with rapid de­ple­tion rates for shale wells, Opec's de­sire for high oil prices, and po­lit­i­cal and se­cu­ri­ty is­sues in key re­gions."

"De­mand has been the clear­est change in the short term, but is al­so the el­e­ment that may most re­li­ably re­verse in the long term. If Chi­na and In­dia grow as ex­pect­ed de­mand could rise by up to a third in the next 20-30 years–but this does not pre­clude short-term weak­ness."

Fitch said while Opec has de­clared sup­port for prices at US$100 bbl and Sau­di Ara­bia, which would have to ab­sorb the great­est pro­duc­tion cuts, would be able to bal­ance its bud­get at US$94 bbl, a lot de­pends on the out­come of Opec's next meet­ing in No­vem­ber."The geopo­lit­i­cal and se­cu­ri­ty pic­ture has not re­sult­ed in the pre­dict­ed fall in pro­duc­tion.

"Progress is be­ing made on Iran­ian sanc­tions; Iraqi pro­duc­tion has re­mained ro­bust; Libyan pro­duc­tion is start­ing to re­cov­er. Mar­ket sen­ti­ment sug­gests the ef­fects of these sit­u­a­tions will re­main be­nign–but there is po­ten­tial for this to re­verse quite rapid­ly," the rat­ings agency said.

Fitch said the ris­ing US dol­lar, which has strength­ened against the eu­ro by around ten per cent since the mid­dle of the year, is al­so con­tribut­ing to weak­ness in oil prices. The price of oil was down US$1.41, or 1.6 per cent, to US$87.44 in trad­ing yes­ter­day.Asked for a re­sponse yes­ter­day, En­er­gy Min­is­ter Kevin Ram­nar­ine told the T&T Guardian he had "noth­ing as yet" to say on the mat­ter. Up to press time Fi­nance Min­is­ter Lar­ry Howai had not re­spond­ed to e-mailed ques­tions.