Brent oil price is expected to average $60 per barrel for the remainder of 2021, $60 in 2022, and $55 in 2023 and beyond, from $55, $55, and $50, said S&P Global Ratings in a new report.
Indeed, oil prices are one of many important inputs of our sovereign ratings analysis. A decline in oil prices negatively affects hydrocarbon exporters, including through their fiscal revenues, balance of payments, and GDP.
Higher oil prices are broadly supportive of ratings on hydrocarbon-exporting sovereigns, but are one of many important factors in credit analysis, it added.
Higher oil and gas prices generally help to improve the government budgets and current account positions of hydrocarbon-exporting sovereigns. Yet, how governments choose to use any increase in revenues and their longer-term policy stance is also important.
"We believe the prolonged and in many cases ongoing structural deterioration in stock positions--government net debt and net external debt alongside relatively limited fiscal and economic reform momentum, remain fundamental considerations for the hydrocarbon-exporting sovereigns we rate," said S&P Global Ratings credit analyst Trevor Cullinan in the report.
"It should be noted that we differentiate between structural and cyclical changes in oil prices," he added.
“We lowered most of the ratings on sovereign hydrocarbon exporters since the structural change in the oil market beginning in the second half of 2014. We expect relatively modest oil prices over the longer term. Since our ratings already factor in our view of such structural changes, we do not expect cyclical price changes to significantly affect our ratings,” the S&P Global Ratings report said.
“This is not to suggest that oil prices were our only consideration in revising the ratings of hydrocarbon-exporting sovereigns since end-2014.”
"For sovereigns generally, important rating factors since 2020 have also been the COVID-19 pandemic's specific country impact and implications for world economic growth. The policy response of hydrocarbon exporting sovereigns is of equal if not more importance than shifts in production or commodity prices," said Cullinan.
