Standard & Poor’s affirms Abu Dhabi credit ratings despite oil plunge

The ratings agency Standard & Poor’s on Monday night affirmed Abu Dhabi’s credit rating, which signals a vote of confidence in the emirate despite the recent fall in oil prices.

“We consider Abu Dhabi’s fiscal and external buffers to be sufficiently strong for the emirate to withstand the lower oil-price trajectory at the current rating level,” the New York-based agency said.

At the same time as it affirmed Abu Dhabi’s rating, S&P lowered its outlook for Saudi Arabia and reduced its rating for Bahrain. It held the ratings and outlook for Qatar stable.

S&P emphasised the pivotal role of oil in making its assessments.

“Given its high dependence on oil, Saudi Arabia’s currently very strong fiscal position could weaken owing to the oil price decline,” it said in reducing its outlook on the kingdom’s long-term debt to negative.

The agency’s current rating on Saudi Arabia is “AA-/A-1+”, which signals that the kingdom is a safe bet for bond investors. Abu Dhabi has the same rating, but with a stable outlook.

Oil, which was trading in the range of US$115 a barrel last June, is now about half that. S&P, in its assessments released last night, has sharply reduced its outlook for the oil price.

As recently as December, the agency was predicting an average price for Brent crude, the European benchmark, of $80 a barrel for 2015 and $85 a barrel for 2015-18.

“We now assume an average Brent oil price of $55/bbl in 2015 and $70/bbl in 2015-2018,” it said last night.

Qatar’s rating is being held at “AA-/A-1+”, with a stable outlook, thanks to “strong net external and fiscal asset positions”.

Bahrain’s rating was downgraded to “BBB-/A-3” because of the country’s “weakening fiscal profile and its uncertain policy response,” S&P said.

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