Moody’s has lowered its crude oil price assumptions and expects that Brent will average $35 per barrel this year and $45/barrel in 2021, or $8/barrel below the rating agency’s March 2020 assumptions, to account for the deeper and longer-lasting shock to global oil demand as a result of the coronavirus shock.
Moody’s Investors Service said in a report that medium-term oil price assumptions are now $45-$65/barrel, compared with $50-$70 in March.
Lower-for-longer oil prices will weaken the fiscal and external positions of all rated oil exporters, exacerbating sovereign credit pressures as lower oil demand persists for several years following the coronavirus pandemic.
“The deeper global economic recession that we now expect in 2020 in all major advanced economies and the drastic reduction in travel in particular have reduced demand for oil products beyond our previous assumptions,” said Alexander Perjessy, a Moody’s Vice President and senior analyst. “This lower-for-longer oil price environment will weaken all oil exporters’ fiscal and external positions.”
Risks are particularly intense in Oman (Ba2 RUR-), Iraq (Caa1 stable), Angola (B3 RUR-), and the Republic of Congo (Caa2 stable) due to their limited fiscal space and heightened liquidity pressures.
Among higher rated sovereigns, the negative credit pressures will be most pronounced in Kuwait (Aa2 RUR-) and Saudi Arabia (A1 negative).
By contrast, relatively greater levels of economic diversification will buffer the impact on Russia (Baa3 stable) and robust sovereign assets will shield the United Arab Emirates (Aa2 stable) and Qatar (Aa3 stable).