$80-$100 is the ‘sweet spot' for crude oil according to L-;T

9 Jun 2022 , 01:06 PM

Since Russia’s invasion of Ukraine, which prompted the West to impose tough sanctions on the Russian oil industry, global crude oil prices have been on the rise. Brent crude oil futures are currently trading above $120 a barrel due to a supply shortage and high demand as the global economy moves beyond the COVID-19 restrictions.

Crude oil prices are expected to rise even more in the coming months, according to major oil market analysts, as demand remains strong. Brent oil is expected to average $135 per barrel in the second half of 2022 and the first half of 2023, according to Goldman Sachs’ Damien Courvalin.

Currently, the public sector, which includes the center, public sector undertakings, and multilateral funding organizations, accounts for 75% of L&T’s new orders. Economists are concerned that increasing food and fertilizer subsidy costs may force the government to cut capital expenditure in the current fiscal year.

Nonetheless, L&T expects capital expenditures in Gulf countries to increase, boosting the company’s foreign order book during periods of high oil prices. Following past failures, L&T has taken steps in recent years to restructure its Western Asia team in order to better execute projects.

This is a very reasonable conclusion as one person’s loss is another person’s gain. If the entire world is forced to pay higher prices for crude oil surely the Gulf countries which are major producers of crude will do well. It is well within the realm of possibility that they will have above average capital expenditure. If L&T is able to materialize this and get major contracts from the Gulf region it will surely improve its international order book.