Prolonged Oil Price Fall Would Impact GCC Banks
(The following statement was released by the rating agency), October 15 (Fitch) A protracted drop in oil prices would canada goose clearance sale result in weaker profits at most banks in the Gulf Cooperation Council (GCC) if the governments significantly rein in spending, Fitch Ratings says. But the 2018 canada goose outlet recent fall in oil prices is likely to have a muted impact in the short term as oil price canada goose outlet store locations shocks tend to have a lagged effect on banks profitability and asset quality after the impact filters through the domestic economy. A Canada Goose Jackets prolonged oil price fall is canada goose replica not our base case. Any delays in infrastructure projects Canada Goose Outlet and payment for contractors would put pressure on banks revenue and asset quality. Financial benefits to citizens in the form of higher Canada https://www.goosesale.ca Goose Coats On Sale salaries and subsidies may also be affected, which may reduce consumer debt servicing levels. Lower oil prices also influence canada goose clearance the domestic stock markets, which canadian canada goose goose jacket is a risk for banks exposed to equities through share lending or investment companies. GCC Canada Goose online sovereigns canada goose coats on sale have a strong track record of supporting the banking sector. In many cases, the states hold significant stakes in the banks and place substantial deposits with them, so there is a high degree of interconnectedness between the sovereigns and the banks. This linear relationship means that any canada goose coats deterioration of sovereign credit quality would also affect banks intrinsic strength. We expect all GCC canada goose outlet toronto factory members, with the exception of Bahrain, to record a budget surplus in 2014, and all to post current account surpluses, though Canada Goose sale in both cases positions will weaken with lower oil buy canada goose jacket cheap prices. Fitch estimates that the fiscal breakeven price per barrel (Brent crude) varies Canada Goose Online among the six GCC members: Bahrain (USD127), Oman (USD103), Saudi Arabia (USD94), UAE (USD71), Qatar (USD72) and Kuwait (USD52). However, most GCC sovereigns would be able to maintain current spending, by drawing down their substantial reserves (largely held by sovereign wealth funds) to buffer canada goose deals the impact of swings in oil prices. But we do not expect rating implications from the price dip in the short term. Our canada goose store bank and sovereign ratings use price assumptions Canada Goose Parka that drop over time. We forecast Brent crude to average USD105/b in 2014 in our September Global Economic Outlook and maintain our expectation that prices will decline to an average canada goose of USD95/b in 2016, due to forecast supply growth outpacing demand growth, despite a variety of geopolitical risks. Oil prices have fallen sharply to around USD85/b for canada goose black friday sale Brent crude from USD115/b in mid June, as demand has reduced. buy canada goose jacket The strengthening of the US dollar is also a factor for the current weakness. Moreover, the geopolitical and security picture has not impacted production: progress is being made on Iranian sanctions; Iraqi production has remained robust and Libyan production is starting to recover. The above cheap Canada Goose article originally appeared as a post on the Fitch Wire credit market commentary page. All opinions expressed are those of Fitch Ratings.