Big winner, European chemicals, big loser, US energy in crude price collapse

PARIS - The recent drop in the price of oil has had knock-on effects for company credit risk around the world, with credit insurer Coface identifying the one big winner as Europe’s chemicals industry and the one big loser as the North American energy sector - affected by an imbalance in supply and demand.

Coface says that following clear improvement in sectorial risk in North America at the end of 2014 (three sectors reclassified “low risk”: Textiles and Clothing, Transport and Chemicals), it has responded to the fall in crude oil prices by downgrading the US energy sector to “medium risk”.

“The output of shale oil and of crude oil continues to rise, while prices have halved since the summer of 2014, reflecting excess supply over demand,” Coface says.

“The oil storage facility in Cushing, the largest in the US, reached saturation level of 77% capacity at end-March 2015. With extraction costs for non-conventional oil remaining high (between $50 and $70 a barrel on average), investment is falling, hitting contractors to the oil industry,” Coface says.

But in Europe’s chemical sector, lower prices are helping reduce the competitiveness gap with US industry (assessed as “low risk”) and to restore margins. “The depreciation of the euro, which favours European chemical exports, is also making a positive contribution. In France the sector’s performance improved significantly, with a +1.9% increase in sales in 2014 in the export and domestic markets.”  www.coface.com (ATI).