Moody’s places Oman, Kuwait under review for downgrade as oil prices tumble
Credit ratings agency Moody’s Investors Service placed Oman and Kuwait on review for a downgrade of their respective ratings on Tuesday.
Moody’s ratings are an indicator of a country’s ability to repay debt. Both Oman and Kuwait have been hit by the historic drop in oil prices over the last month following the collapse of talks between the Organization of Petroleum Exporting Countries (OPEC) and Russia, prompting Moody’s to schedule a review of both countries’ ratings.
“The decision to place the rating under review for downgrade reflects Oman’s increased external vulnerability and government liquidity risks following the large oil price shock and the severe tightening in external financing conditions compared with a few weeks ago,” the ratings firm said.
Moody’s last downgraded Oman’s ratings two weeks ago to Ba2 with a stable outlook.
The agency placed Kuwait’s rating on review for a downgrade as the government’s revenue has declined significantly following a sharp decline in oil prices. Moody’s noted that the decision was partly based on an assessment of whether the government will be able to access sufficient sources of funding to keep up with an increase in its needs.
The coronavirus has caused widespread disruption across the global economy. The pandemic has significantly impacted oil demand as borders remain closed, businesses shuttered, and people are told to stay home.
Oil market prices have also been under significant pressure due to an ongoing price war for market share between Saudi Arabia, Russia, and other producers following a breakdown in talks in early March to secure a new output cut agreement and support prices between OPEC and other producers.