(Combines stories, adds detail, quotes)
By Marc Jones
LONDON, March 10 (Reuters) - The world's top rating agencies
said on Tuesday that the sharp drop in oil prices, if sustained,
could cause a wave of sovereign downgrades as well as heavy
multi-notch rating cuts to junk-rated oil and gas firms.
Fitch's top Middle East and Africa sovereign analyst, Jan
Friederich, told Reuters that with oil prices dropping as low as
$31 a barrel this and likely to stay low, countries from Saudi
Arabia, Iraq and Oman to Nigeria and Angola were all in focus.
"Countries that are in a somewhat vulnerable external
position and have a fixed exchange rate are of course
particularly vulnerable," Friederich said.
On individual countries, he said Saudi Arabia's financial
reserves and its sovereign wealth fund provided a buffer but
that there was not "infinite leeway" in the country's A (stable)
rating for the buffers to disappear.
A continued rise in government debt in Oman "would be a
concern" he added, while Nigeria's B+ (negative) rating could
face problems if a prolonged attempt to defend the country's
currency peg ate heavily into its international reserves.
Commodity dependence is most pronounced globally in Angola,
Iraq, Suriname and Gabon, Fitch analysis shows and there are a
dozen more developing countries for whom commodities exceed 70%
of foreign-currency income.
S&P Global meanwhile slashed its average Brent oil price
assumption for the year to $40 per barrel, warning too that some
junk-rated oil and gas firms could face multi-notch downgrades.
S&P had previously expected Brent to average $60 this year.
It also cut its forecasts for next year to $50 from $55 and its
Henry Hub gas price assumptions for this year to $2 per million
British Thermal Units from $2.25 previously.
"It is likely rating actions (for oil and gas production
companies) in the investment-grade category could be more severe
than during the last cycle," S&P said, adding that it would
review all its exploration and production and oilfield services
ratings over the next several weeks.
"For the high-yield segment, in particular, issuers without
hedges, those who face upcoming maturities, and are somewhat
squeezed on borrowing-base revolving credit facilities will most
likely face multiple notch downgrades," it added.
One of its top sovereign analysts, Frank Gill, also
highlighted that no Gulf countries balance their bugets with oil
at $40 a barrel and only Qatar and Kuwait do so at $50 a barrel.
"Except in the case of exporters with very low fiscal
buffers, what matters is where oil prices settle next year, and
that really depends on whether or not the global economy can
recover significantly," Gill said.
Elsewhere, Mexico could be hurt. "It has a significant oil
sector and is closely connected to the U.S. economy," Gill's
colleague Joydeep Mukherji said, also citing the problems posed
by the Coronavirus.
Moody's meanwhile cut its assumption for West Texas
Intermediate prices for the year to significantly below last
year's average of $57 a barrel.