Oil prices are likely to remain at very low levels in 2016. That’s why Credendo Group recently reviewed short-term political risk classifications for net oil & gas exporters worldwide. The risk assessment took into account factors such as:

  • simulated impact of a drop in oil prices to the level around USD 30 per barrel;
  • degree of reliance on oil or hydrocarbon as source of current account receipts;
  • exchange rate mechanism impacting the evolution of the foreign exchange reserves;
  • possibility of central banks intervening to defend the local currency;
  • risk of imposition of exchange or import restrictions;
  • resilience based on the size of external assets.

The outcome

About one third of the oil-producing countries have been downgraded. Two thirds of the oil exporters maintain their previous risk classification.

WIF8_Infographic_Country1000

Downgraded countries

Algeria:  2 > 3
+ Ample foreign exchange reserves
– Liquidity position expected to deteriorate
– Imposition of import restrictions to improve external position
Azerbaijan: 3 > 4
+ End of exchange rate support in December 2015
– Introduction of soft exchange restrictions
– Highly reliant on oil
– Liquidity position expected to deteriorate
Brunei: 1 > 2
+ Vast sovereign wealth fund
+ Expected increase of oil production in 2016
– Highly reliant on oil
– Liquidity position expected to deteriorate
Colombia: 2 > 3
– Increasing short-term external debt
Ecuador:  4 > 6
– Worsened twin deficit (= budget deficit + current account deficit)
– Weakened competitiveness due to strong dollar which is used as currency
– Risk of liquidity crunch leading to import restrictions or capital controls
Kuwait: 2 > 3
+ Vast sovereign wealth fund
– Highly reliant on hydrocarbon revenues
– Liquidity expected to deteriorate
Oman: 1 > 3
– Highly reliant on hydrocarbon revenues
– Liquidity expected to deteriorate
Qatar: 1 > 3
+ Vast hydrocarbon reserves, low production costs
– Highly reliant on hydrocarbon revenues
– Liquidity expected to deteriorate
Suriname: 4 > 5 Trinidad and Tobago: 2 > 3

Countries with unaltered risk classification

Angola (6), Bahrain (2), Bolivia (2), Côte d'Ivoire (4), Indonesia (3), Kazakhstan (3), Malaysia (3), Mexico (2), Myanmar (5), Niger (4), Nigeria (6), Papua New Guinea (4), Russia (4), Saudi Arabia (2), Timor-Leste (6), Turkmenistan (5), United Arab Emirates (2), Uzbekistan (6) and CEMAC (Cameroon, Republic of Congo, Gabon, Equatorial Guinea and Chad) (4).