Over the past months, global oil prices have been hit by a significant downward shock. Mid-October, Brent crude oil prices had fallen by more than USD 30 since their peak of USD 115 mid-June, hitting a near four- year low. In the past months, the upward price effects of the escalation of severe security issues in Libya and Iraq and the conflict between Russia and Ukraine were outweighed by (so far) resilient oil production in Libya and Iraq, a strengthening dollar and weaker-than-expected worldwide economic performance.
Meanwhile, US production of hydrocarbon products continues to grow, largely thanks to a boom in non- conventional oil and gas production.

Impact on country risk

Lower international oil prices reduce the import bill of energy importing countries. However, energy exporting countries in the Middle East and North Africa (MENA), which houses the world’s largest conventional oil and gas reserves, see their incomes shrink as energy revenues represent up to 95% of total exports and public revenues. Kuwait and Saudi Arabia are in the best position to deal with a fall in oil prices. In this additional assessment, an in-depth analysis is provided of the ability of MENA’s net oil and gas exporting countries to deal with negative oil price shocks.

Analyst: The Risk Management Team, s.vanderlinden@credendogroup.com