Feb 5, 2019   SOURCE: BusinessWire

KBRA Releases Corporates/Sovereigns Research: Global Political Economy is a Supporting Actor in Oil Sector Performance

Kroll Bond Rating Agency’s (KBRA) latest Corporates/Sovereigns research report states that global macroeconomic conditions and foreign policy developments are important factors underlying oil sector performance through their impact on supply and demand curves. This report provides an overview of the global economic outlook and geopolitical backdrop that influence the oil sector, as well as highlights the key fundamental shifts in oil supply and demand.

The credit quality of KBRA’s monitored portfolio of 80 U.S.-based energy firms has improved in the recent period, thanks in part to higher oil prices through Q3 2018, which enabled companies to build up financial buffers. In KBRA’s view, many energy companies are well-positioned to weather a period of oil price volatility or considerably lower oil prices for a short duration. We expect to see a range of outcomes in terms of durability and performance as price volatility continues. However, KBRA believes that many management teams are adopting more conservative operating and financial practices and that prudent operators in the industry will find ways to insulate against price volatility through sound management and ongoing investments in efficiency-enhancing technology.

KBRA’s expectation is for continued near-term volatility in oil prices as supply and demand curves continue to adjust. This report also highlights that the oil price is only one metric which shapes our credit views on oil-producing companies. Financial policies and practices are often of paramount importance in shaping KBRA’s opinion on credit risk. This commentary builds on KBRA’s emphasis on bringing together viewpoints and expertise from across the company, in this case Sovereigns and Energy/Corporates, in order to maximize analytical depth.

To access the full report, click here.

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.