COVID-19 and Trump’s indifference helped human rights abusers in 2020
Belarusian government sees $2bn of withdrawals, issues $580mn worth of bonds in 2020
Lukashenko: I am no enemy of the people
Storming parliaments: New Europe's greatest hits
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
The volume of the Russian National Wealth Fund tops $183.93bn as gold overtakes dollar asset for first time
EU to begin certifying Russian Sputnik V vaccine for use in Europe
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
EBRD investments reach record €11bn in pandemic-struck 2020
FPRI BMB Ukraine: Most Ukrainians are optimistic about 2021 – poll
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Top Centre Party official suspected of corruption in Tallinn real estate scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
Romanian tech entrepreneurs expand into banking sector
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
FDI inflows to CEE down 58% in 1H20 but rebound expected
OUTLOOK 2021 Slovakia
Slovakia to invest €1.2bn in digitisation
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
OUTLOOK 2021 Albania
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Bosnia’s real GDP contracts 6.3% y/y in 3Q20
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
OUTLOOK 2020 Bulgaria
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Socialist lawmakers in Moldova scrap settlement on $1bn bank frauds
Montenegro’s new ruling coalition carves up top state jobs
OUTLOOK 2021 Montenegro
Vast tide of floating waste threatens Balkan hydropower plants
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
Moldova fears flooding from Ukraine's planned Dniester hydropower plants
Romania’s industrial recovery paused in November
OUTLOOK 2021 Serbia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Slovenia’s Eligma completes €4mn funding round
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
Turkish opposition leader lawsuit demands one lira from Erdogan, police probe “bald” interior minister posts
OUTLOOK 2021 Armenia
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
Russia, Kazakhstan pushing for oil production increases on the back of coronavirus vaccine-fuelled oil price optimism
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
STOLYPIN: Scope for limited progress under Biden, so long as the past remains the past
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Uzbekistan’s Makro positions itself for growth in a more competitive market
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Fitch Ratings has cut its short and medium-term oil and natural gas price assumptions in expectation of very large market oversupply in 2020.
The agency cut its outlook for average prices for the Brent blend for 2020 from $62.5 per barrel to $41/bbl and its 2021 forecasts from $60/bbl to $48/bbl respectively.
“We assume the market will gradually rebalance in the next two to three years, but we have also trimmed our long-term assumptions to reflect continued efficiency gains, low break-even oil prices of many greenfield projects and a potential for demand to slow due to energy transition,” Fitch said in a note to subscribers.
Some economists are predicting that the series of “stop shocks” following the crash of oil prices in March and exacerbated by the coronavirus (COVID-19) pandemic will tip the planet into a global recession of -0.5% this year, although there is still no consensus on just how bad things will get.
Massive oil oversupply in the works
Fitch estimates the crude oil market will be “massively oversupplied in 2020,” because of waning demand due to the coronavirus outbreak and growing production following the OPEC+ failure to agree on output cuts.
“Saudi Arabia intends to increase production from April and utilise its significant spare capacity. This could keep the Brent price below $40/bbl for the rest of this year, as the magnitude of oversupply in 2020 in various scenarios is likely to be much larger than the maximum of 1mn barrels a day (bpd) seen in the past decade,” Fitch said.
Fitch is more upbeat about the medium term and expects the market to rebalance over the next two or three years due to a recovery in demand once the coronavirus outbreak is contained, as well as the impact on the US shale production, which will slow at low prices. At the same time the agency suggested the OPEC countries will eventually cut production again to boost prices within the foreseeable future as their economies will come under pressure if prices stay too low for too long.
Both Saudi Arabia and Russia, the key parties to OPEC+, have fiscal break-even Brent prices above current market prices, at $91/bbl and $53/bbl respectively, according to Fitch.
“We expect US shale production to return to growth when oil prices stabilise, as happened in 2016-2017, which would limit the extent of the price recovery,” says Fitch.
Gas glut, but prices to recover slowly
Natural gas markets are also vastly oversupplied, says Fitch. Europe in particular faces a gas glut following the unusually warm winter and the large supplies of gas in storage as a result of a gas war between Russia’s Gazprom and Ukraine’s Naftogaz over the renewal of the transit deal that was averted at the last minute in December. And thanks to the warm winter the gas glut extends beyond Europe.
“Current prices in Europe and Asia rarely cover the half-cycle cash costs (that include variable operating costs and transport to Europe) of natural gas and LNG suppliers, including Gazprom and US producers, and are therefore unsustainable,” Fitch said. “We assume the Dutch TTF and UK NBP gas prices in Europe will gradually recover to $5.5/mmcf over three to five years, broadly corresponding to the full-cycle costs of US producers, including shipping to Europe and capex. We assume the US Henry Hub price to recover to $2.5/mmcf in the long term.”
But gas prices will remain low in the meantime over the next two years, according to Fitch, due to weak demand for LNG in China, high volumes of gas in European storage and commissioning of new LNG capacity, albeit at slower pace than in 2016-2019.
“Our ratings will be driven by issuers' expected credit profiles in 2020-2023 (assuming their liquidity remains sufficient), rather than when prices trough. This is in line with our "rating-through-the-cycle" approach,” says Fitch. “We do not anticipate that this revision of oil and gas prices will trigger portfolio-wide negative rating actions, but we will assess the credit impact case by case. High-yield issuers are more exposed, particularly those with high liquidity and refinancing risks, given tough capital and asset sale markets.”
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