Fitch to Reconsider PEMEX RatingBy Peter Appleby | Thu, 04/02/2020 - 17:16
Fitch Ratings, one of the world’s so-called “Big Three” rating agencies, yesterday reported that it will be reviewing PEMEX’s credit ratings before the end of April. The agency, part of the larger UK-US Fitch Group, is concerned about the company’s weak liquidity and exposure to price volatilities, El Economista reported. Fitch analyst Joe Bormann explained during a webinar that PEMEX’s bonds have been deeply affected by the OPEC+ alliance breakup, which saw Russia and Saudi Arabia go head-to-head in a price war. Additionally, PEMEX bonds maturing in 2027 have lost 31 percent of their value since January.
The statement comes after Fitch Rating’s announcement of its oil price expectations cut globally as a result of the COVID-19 crisis and a price war that have led to prices falling to their lowest point in decades. The Mexican crude oil basket value closed at US$10.61 yesterday, from a price of US$59.35 on January 6 of this year. The Mexican basket lost a further 1.39 percent of its value during yesterday’s trading, while Brent crude futures for June rose 8.8 percent and WTI’s future for May rose 0.54 percent.
Fitch’s reassessment comes following last week’s Standard & Poor’s downgrade of PEMEX’s global scale foreign currency and local currency ratings from BBB+ to BBB and A- to BBB+ respectively, and Mexico’s sovereign rating cuts from BBB+ to BBB.
There have been a variety of pessimistic forecasts for the Mexican economy that come from respected credit rating agencies and banking institutions. At the end of March, Moody’s forecast a 3.7 percent retraction of Mexico’s economy during 2020 and a recuperation in 2021 of 0.9 percent. One of the most gloomy predictions came from US bank JP Morgan, which suggested a 7 percent contraction during 2020. Meanwhile, Bank of America says the Mexican economy will contract 8 percent this year. Banxico forecast a 2020 retraction of 3.5 percent in its Private Sector Economy Expectations survey.