Moody’s Investors Service said it had initiated reviews for for 12 oil-exporting nations for downgrade to assess the full impact of the oil price shock in a systematic and consistent manner.
In four cases, Moody’s has downgraded the ratings and placed them on review for further downgrade to reflect the minimum impact that it believes the fall in prices will have on those sovereigns’ credit profiles, it said in a statement, adding that it aims to conclude all rating reviews within two months.
The Moody’s report titled “Oil-Exporting Sovereigns — Global: Key Drivers of Rating Actions on 18 Issuers to Assess Impact of Sharp Fall in Oil Prices”, explains that the continuing fall in oil prices has material, and in some cases quite profound, implications for the economic growth and the balance sheets of sovereigns that rely to a large extent on oil and gas to drive their growth and finance their expenditures.
“Given the importance of economic and fiscal strength in Moody’s sovereign risk analysis, the rating agency believes that the credit risk profiles of these oil-exporting sovereigns are therefore under increasing pressure,” the report said.
In January, Moody’s latest oil price forecasts announced a further downward revision of its oil price forecasts for Brent to US$33 per barrel in 2016 and US$38 per barrel in 2017, rising only slowly thereafter to US$48 by 2019. The ratings agency expects oil prices to remain low for sometime.
Large oil producing nations are as much as risk of a potential credit downgrade as the smaller ones. The 12 countries that face a potential credit downgrade are: Abu Dhabi, Angola, Gabon, Kazakhstan, Kuwait, Nigeria, Papua new Guinea, Qatar, Russia, Saudi Arabia, Trinidad & Tobago and United Arab Emirates.
The four that have already been downgraded are Azerbaijan, Bahrain, Republic of Congo and Oman.
Saudi Arabia and Russia are both heavily dependent on oil export earnings. Oil and gas account for over 84 percent of goods exports and roughly 40 percent of Saudi’s GDP. They also provide around 62% of consolidated government revenues.
Oil and gas account for close to 60 percent of goods exports and roughly 17 percent of Russia’s GDP. Hydrocarbons provided around 43% of federal government revenues in 2015, making it highly vulnerable to oil prices.