Standard & Poor's set to downgrade oil majors
Oil companies piled on debt due to low oil prices last year and that's compounded by the energy transition and hostility in developed-market governments.
The result is that access to capital at cheap rates is slowly being closed off. At the moment, it doesn't really matter because even junk bonds have ultra-cheap rates but the message to companies from ratings agencies (and from the market) is that they want oil companies to cut debt.
The result is that oil companies aren't going to be investing in new production unless oil rises above $80 for a sustained period, or maybe even $100. I believe that production is going to run off much more quickly than the transition away from fossil fuels and that spare OPEC capacity isn't even close to filling in the gap. The result will be a spike in oil prices in two years or less.
Here's the list of majors who are on watch negative or had their outlook lowered:
- Royal Dutch Shell
- Total
- Standard Oil
- BP
- Imperial Oil
- Exxon
- Conocophillips
- Chevron
- Suncor
- Noble
