On March 19, 2020, S&P Global Ratings materially lowered its oil price assumptions for 2020. This follows an earlier significant downward revision of its price assumptions on March 9. Prices for crude oil in spot and futures markets are more than 55% lower than levels observed during the summer of 2019 when prices increased due to rising geopolitical tensions. When we most recently reviewed Oman (see “Oman Ratings Affirmed At ‘BB/B’; Outlook Negative,” published Oct. 18, 2019), we expected Brent oil prices to average $60 per barrel (/bbl) in 2020 and to gradually decline to $55/bbl from 2021. We now assume an average Brent oil price of $30/bbl in 2020, $50/bbl in 2021, and $55/bbl from 2022. Oman Downgraded To ‘BB-‘ On Higher External Risks And Indebtedness; Outlook Negative
On March 26, 2020, S&P Global Ratings lowered its long-term foreign- and local-currency sovereign credit ratings on Kuwait to ‘AA-‘ from ‘AA’. The outlook is stable. At the same time, we affirmed our ‘A-1+’ short-term foreign and local currency sovereign credit ratings on Kuwait. We revised our transfer and convertibility assessment for Kuwait to ‘AA’ from ‘AA+’.
Despite efforts to increase non-energy receipts, Bahrain’s revenue remains dependent on oil, and hence sensitive to energy price shocks, including this year’s. Recent revisions to our 2020 price projections for oil imply more elevated current account deficits for Bahrain, raising external vulnerabilities. However, the provision of zero interest loans from neighboring sovereigns and the expectation of further timely support, if needed, provide the government with an important financing buffer. We are revising our outlook on Bahrain to stable from positive and affirming our ‘B+/B’ long- and short-term sovereign credit ratings.
At the March 6 OPEC meeting, Saudi Arabia and Russia and other OPEC members did not reach agreement on continued oil supply restrictions, leading to the collapse of the OPEC+ supply constraint agreement from April 1, 2020. The prospect of a large supply increase, alongside lackluster demand tied to the COVID-19 pandemic, led to a sharp fall in global oil prices, which will see a sharp rise in Saudi Arabia’s fiscal deficit in 2020, albeit narrowing thereafter. Our estimate of Saudi Arabia’s strong net asset (stock) position on both its fiscal and external balances continues to be a key ratings support, but prolonged low oil prices will erode its net asset stock and begin to put pressure on the ratings. Saudi Arabia ‘A-/A-2’ Ratings Affirmed
Abu Dhabi’s net asset position exceeds 250% of GDP, which alongside proactive policymaking comfortably cushions it from the sharp fall in oil prices and other external shocks. Contingent liabilities from government-related entities or other emirates, although not contractual, could materialize in a highly uncertain regional and global economic environment; yet we expect Abu Dhabi’s fiscal buffers will remain strong. Abu Dhabi’s strong net asset position exceeds 250% of GDP, which alongside proactive policymaking comfortably cushions it from the sharp fall in oil prices and other external shocks. We are therefore affirming our ‘AA/A-1+’ sovereign credit ratings on Abu Dhabi and maintaining a stable outlook. On March 26, 2020, S&P Global Ratings affirmed its ‘AA/A-1+’ long- and short-term.