Several oil-producing nations woke up to lower credit ratings from S&P amid the latest oil price rout, Reuters reports, listing Oman, Nigeria, Mexico, Angola, and Ecuador among those downgraded and noting that Saudi Arabia and Russia escaped the downgrades.
Oil prices have fallen by more than half since the start of the year, with the drop particularly steep after March 6 when OPEC+ failed to agree on deeper production cuts. In retaliation for Russia's unwillingness to cut more production, Saudi Arabia said it would increase its oil output to 12.3 million bpd and boost production capacity to 13 million bpd.
Russia, meanwhile, has stated it could live with oil at $25 for a decade if need be. The country's budget for this year plans on an oil price of a little over $42 for the Urals blend, but it has liquid assets worth more than $150 billion in its sovereign wealth fund alone. It also has other financial reserves, bringing the total to $570 billion, a little more than what Saudi Arabia has as reserves. These reserves may be why S&P spared the two biggest OPEC+ producers from a credit rating downgrade.
Moody's earlier this week downgraded its projection for Russia's GDP, however, to 0.5 percent from 1.5 percent because of the oil demand slump and the weak purchasing power of Russian households.
These unfavorable conditions in Russia, however, is nothing compared to the situation in the more oil-dependent countries. Nigeria's credit rating, for instance, slid to B-, which is even deeper into junk territory than the previous B.
Mexico moved closer to that dreaded junk territory, to BBB. Angola and Ecuador, according to S&P, are close to the dangerous area of default, resulting in a downgrade to CCC.
"We have lowered the ratings or assigned a negative outlook on some sovereigns because of their heightened risk to manage the fiscal and external shock resulting from lower (oil) prices in addition to the blow to economic growth as a result of the pandemic," the ratings agency said.
By Irina Slav for Oilprice.com
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