22 May 2012 06:46 [Source: ICIS news]
SINGAPORE (ICIS)--Oil prices are expected to increase further with a fresh wave of international sanctions slapped on ?xml:namespace>
But the possibility of crude prices hitting $150/bbl is “low” if
While higher oil prices are “credit-positive” for international oil companies (IOCs), other corporates such as airlines, oil refining, as well as automotive and retail sectors, are expected to take hits, Moody’s said.
"As most IOCs have no or very limited exposure to Iran in terms of their overall production, higher prices triggered by a supply squeeze from the sanctions on Iran would benefit their oil exploration and production (upstream) operations considerably," said Moody’s managing director for EMEA (Europe, Middle East and Africa) corporates.
The expected gains could more than make up for any adverse effects on IOCs' downstream businesses, which typically account for a much smaller portion of their total operating profits and cash flows, the ratings firm said.
"However, an oil shock resulting from a US/EU economic confrontation with Iran would ripple throughout other industries around the world -- and could also derail the global recovery," said Steven Wood, Moody’s managing director for US corporates.
Moody's defines an "oil shock" as a prolonged period when oil prices stay at $150/bbl.
Under such circumstances, European auto makers would be hardest hit, according to Moody’s, while airlines are expected to incur operating losses from sustained higher costs of jet fuel, with the consequent air fare increases likely to hurt demand.
Retailers, restaurants and other industries that depend on discretionary spending are also expected to suffer if fuel prices were to surge, the ratings firm said.
"The magnitude of oil price increases linked to the EU and US sanctions, which take effect from June, will depend in part on how strictly they are adhered to," said David Staples, managing director for Gulf Cooperation Council (GCC) corporates.
Moody’s said that it is unclear at this stage to what degree Iran's top customers will reduce their imports in order to avoid the sanctions.
“Other major oil-producing countries have capacity to cover the loss of supply from
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections