Standard & Poor’s released its latest update on a number of oil- and gas-producing nations yesterday, slashing credit ratings left right and center. But one energy giant stood out with a glowing report and no action taken: Qatar.
Kazakhstan, Saudi Arabia, Bahrain and Oman were all cut, while Russia’s rating was maintained, but with a negative outlook. Even with much lower energy price assumptions, S&P took a much more optimistic line on Qatar’s prospects.
The report was optimistic about growth outside of the oil-and-gas sectors, and suggested that the fiscal squeeze from lower energy revenues would not be as bad for Qatar as it will be for other countries in the region.
Unlike Saudi Arabia, S&P notes that Qatar seems politically stable. It also benefits from long term gas contracts, which offer certainty on incoming revenues. It’s also less dependent on energy receipts than other countries in the Gulf region.
That’s already a message that the market has taken into account. A quick look at the price of credit default swaps, instruments that protect bondholders against the default of a company or government, shows how markets now attach considerably more credit risk to Saudi Arabia than to Qatar.
Up until the middle of 2015, the price of 5 year CDS for Qatar and Saudi Arabia was practically identical, but Saudi CDS is now considerably more expensive, signalling a greater risk.