The weekly report issued by Al-Hilal Oil Company Weekly that Saudi Aramco announced the discovery of two new fields during the first quarter of 2020 in the Kingdom, one of which is an oil and gas reservoir, and the other an oil reservoir. Aramco stated that the oil and gas reservoir was discovered in the northwestern part of the Kingdom of Saudi Arabia, while the oil reservoir was discovered in the Central Operations Area.The Saudi company confirmed that in 2019, two oil fields and two oil reservoirs were discovered, along with an onshore gas field. (Economy)
Economic Challenges Facing Producers and Importers
The report noted that global credit rating agencies appear to be in a hurry to assess and rate oil- and gas-producing economies under current conditions and at prevailing prices, which may exacerbate financial challenges and increase the cost of financing and access to it. It explained that the economies of both producers and importers are currently facing the same economic challenges, as all economic sectors—including manufacturing and services—have been affected by lockdowns and a decline in global demand for various goods and services.
The report pointed to the global financial and economic system’s inability to effectively cope with the rapidly evolving situation surrounding COVID-19, which has increased financial risks due to the collapse of oil prices and a one-third decline in global demand for fuel, This had implications for yields and countries" ability to service their debts and secure additional financing at acceptable costs, meaning that the downgrades of producer economies" credit ratings are disproportionate to the prevailing circumstances and do not reflect the true state of these countries" financial positions.
Discrepancies in Credit Rating Agency Ratings
The report noted the divergence in credit rating agency assessments over the past few days, reflecting the difficulty of evaluating the current and projected state of national economies. This comes as Moody’s downgraded Saudi Arabia’s outlook from stable to negative due to an expected one-third decline in revenues this year. Assuming an average oil price of $35 per barrel in 2020 and a potential rise to $45 in 2021, the fiscal deficit will widen to 12% of GDP in 2020, On the other hand, Standard & Poor’s maintained its ”stable" rating for Saudi Arabia due to the positive balance of payments and strong fiscal reserves.
Constraints Hampering the Economies of Producers
Although credit ratings are important for the economies of producers, importers, and major global companies, they appear to run counter to current conditions and lack any added financial or economic value, imposing further constraints that hinder the ability of economies and companies to emerge with minimal financial and economic losses from this crisis caused by the COVID-19 pandemic.
It is worth noting that the rapid fluctuations in energy markets may have either a positive or negative impact on the economies of producers and importers on a daily basis, and these markets are showing rapid rebounds that may enable them to return to their previous financial and economic levels before the release of the next report by credit rating agencies.
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