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Page added on March 1, 2016
World’s top oil producers forced to load up on debt
The 70 percent decline in oil prices since mid-2014 has severely dented the finances of major oil producing nations around the world, forcing even the wealthiest producers to move into unplanned borrowing and debt issuance, a new report shows.
The harsh drop in the price of oil, which slumped way beyond most analyst predictions has meant that even OPEC heavyweight Saudi Arabia was pushed into issuing emergency debt, with the nation now expected to account for 70 percent of all Gulf state borrowing this year, according to ratings agency Standard & Poor’s.
Borrowing from oil producing nations, particularly in the Middle East and North Africa, is set to remain elevated in 2016, as many nations are still trying to catch up with the harsh side effects of the tumble in the oil price that took place in 2015, the report said.
“The more than 70 percent decline in oil prices since mid-2014 has weakened Gulf Cooperation Council (GCC) countries’ public finances, resulting in government deficits for most sovereigns. The financing needs of some GCC governments are apparent, but it remains unclear in some cases exactly how the deficits will be financed, in terms of the mix between asset drawdowns and debt issuance,” said S&P credit analyst, Trevor Cullinan.
S&P expects the 13 Middle East and Northern African (MENA) sovereigns it rates to borrow around $134 billion from long-term commercial sources in 2016. This compares with borrowing of $143 billion in 2015, which was more than double the $68 billion predicted.
Oil prices remain down about 70 percent from their mid-2014 highs above $100, though a steady rebound over the past two weeks has had some traders and investors wondering whether the market has reached a near-term floor. Oil prices traded higher on Tuesday, with internationally traded Brent Crude up around 0.7 percent at $36.80 per barrel.
Saudi Arabia, the largest oil producer of oil cartel OPEC, which has been pressured by other members to cut production in a bid to support prices was close to being debt-free before the precipitous fall in the commodity’s price S&P said.
“The government was close to paying down all of its debt in 2015. But from July of that year, the government began a program of debt issuance, with Saudi riyal 20 billion ($5.3 billion) issued each month between August and December. We expect Saudi Arabia’s debt stock to rise to 9 percent of GDP in 2016 and to about 30 percent by 2019,” Cullinan said.
Global Chief Economist at HSBC, Janet Henry said risks for the Middle East and Latin America still remain firmly on the downside in 2016, even as the oil price has stabilized from record lows.
“Lower oil prices mean higher deficits, rising debt, strains to currency pegs and lower growth,” she said in a note on Tuesday.
“We expect the pegs to remain intact, but with lower fiscal revenues, spending will have to be cut dramatically and subsidies on fuel reduced. We expect growth in the MENA region to be 1.9 percent in 2016, down from 2.9 percent in 2015,” Henry added.
6 Comments on "World’s top oil producers forced to load up on debt"
makati1 on Tue, 1st Mar 2016 8:00 pm
DEBT:
“Saudi Cash Reserves Drop To Lowest Level In 40 Months Amid Crude Carnage”
“GCC faces pressure over $94bn of outstanding debt, says HSBC”
“Scaling a $9.5 Trillion Debt Wall”
“Chesapeake’s AIG Moment: Energy Giant Faces $1 Billion In Collateral Calls”
“Spain’s Abengoa posts 1.2 bln euro net loss, debt rises”
“Upstream Debt May Put Pipelines Under Pressure”
“Vampire attack: Debt-laden companies imperil China’s growth”
“Study: Americans lie about credit card debt because of social stigma”
“Bond Vigilantes Push $258 Billion of Oil Debt Past Junk”
“Shale Oil Architect Predicts Doom for Some Drillers Amid Slump”
“UK Oil Industry At The “Edge Of A Chasm””
“US government releases its 2015 financial statements”
“Report: Student loan debt increased by $29B in last quarter of 2015”
“Presenting America’s Own “Ghost Cities””
http://ricefarmer.blogspot.fr/
Only a taste of the DEBT that is killing the global economy.
Northwest Resident on Tue, 1st Mar 2016 8:58 pm
Art Berman Sees Oil Heading To $16, Will Lead To “Banking Bloodbath
Interesting article posted on ZH. Not that I agree with every point Berman makes. Why would he posit that SA is trying to keep oil prices low to drive American shale producers out of business, for example? Surely he knows that propaganda theme is bullshit. Still, worth reading. The oil business is heading fast toward a world of hurt, as are we all.
http://www.zerohedge.com/news/2016-03-01/art-berman-sees-oil-heading-16-will-lead-banking-bloodbath
Truth Has A Liberal Bias on Tue, 1st Mar 2016 11:15 pm
WTI is $34.03 as I write this. Brent is slightly more. Traders will soon realize that Cushings is meaningless, USA imports of crude are increasing even though foreign oil supply is higher priced than WTI (so Cushings is full of something but it’s not what Gulf Coast refineries are looking to buy), KSA is maxed out and will decline in production as their domestic consumption increases. Russia will be down. Middle East OPEC has been on an infill drilling binge since 2011 and the best they can do is stay flat. Here comes the shit storm.
Kenz300 on Wed, 2nd Mar 2016 8:36 am
Fossil fuels are a bad investment………….
It is time to transition to safer, cleaner and cheaper alternative energy sources…………
Apneaman on Wed, 2nd Mar 2016 6:49 pm
They were forced? I thought we lived in a free market paradise? Whenever the home team makes a killing in the “free market” they all a bunch of goddamn genuine geniuses, but when it dont work out, it’s always because some bad guys (black hats) “forced” them into it.
Davy on Thu, 3rd Mar 2016 9:37 am
Load up on debt and or sell all your gold:
http://www.zerohedge.com/news/2016-03-03/its-official-moment-canada-has-no-gold-reserves-left