Developed Markets Oil And Gas Annual Transitions: Downgrades And Upgrades Balanced

The Oil and Gas industry has had a turbulent year with weak and volatile oil prices. The November 2016 agreement between OPEC and Russia has been undermined by resurgent supply from Libya and Nigeria along with increased US shale activity. The recent Norwegian decision to remove oil stocks from their Sovereign Wealth Fund benchmark has highlighted the potential impact of electric car technology on future demand. But in the near term, renewed Middle East tensions and the ever-expanding global middle class may shift the demand-supply balance in the opposite direction.

Exhibit 1 shows the pattern of credit migrations over the 12 months to August 2017. This is based on almost 3,000 observations from the contributing IRB and CCAR-regulated banks. It shows:

• The number of upgrades and downgrades is approximately symmetric.
• The migrations from High-Yield to Investment-Grade outweigh the downgrades in the opposite direction.
• There are more downgrades than upgrades between the aa and a categories.
• Some companies have upgraded or downgraded by as many as three notches over this period.

Exhibit 1 Annual Transitions in the Oil and Gas Industry (Developed Economies)


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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.