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In This List

Global Credit Conditions' Broad Stability Threatened by Potential U.S.-China Trade War

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Global Platts

Turning Tides: The Future of Fuel Oil After IMO 2020

S&P Global Ratings

S&P Global Ratings' Global Outlook 2019

S&P Global Platts

Energy: What to Watch in 2019

Global Credit Conditions' Broad Stability Threatened by Potential U.S.-China Trade War

While global credit conditions remain broadly favorable, an escalating trade battle between the U.S. and its trading partners, notably China, in the form of billions of dollars in retaliatory tariffs are dragging down global investor confidence, spending, and economic growth. It's still unclear whether all involved parties will negotiate new trade terms or retaliate into an all-out trade war. Whatever the case, the actions thus far have infused broad uncertainty around the world.

The positive economic growth that continues in all regions--at differing speeds, of course--is tempered by what S&P Global Ratings has identified as Top Global Risks, including trade interruption and geopolitical tensions, the potential for asset-price volatility, Chinese debt overhang, and investor concerns about a turn in the U.S. credit cycle, which could lead to a liquidity pullback from emerging markets.

Our credit condition expectations by region are as follows:

The U.S. and Canada

Credit conditions remain broadly favorable, as the U.S. economic expansion continues, interest rates are increasing at a measured pace, and upcoming maturities appear manageable. The biggest threats to what's been a historic stretch of benign conditions are increasing—primarily the escalating U.S.-China trade dispute, along with rising corporate debt, upward pressure on borrowing costs, and imbalances in Canada's housing market.

Financing conditions remain favorable, with debt issuance holding up fairly well, the corporate distress ratio at the lowest in more than three years, upcoming maturities seeming manageable, and interest rates rising at a measured pace.

Read our North America Credit Conditions Report

Europe, the Middle East and Africa(EMEA)

Credit conditions still remain favorable as the economy navigates recent shocks quite well. Still, nationalistic policies in the region over time threaten to undermine confidence that global institutions can cushion against unexpected systemic shocks as they arise. Trade and Brexit are two such policies with potential for widespread systemic impact.

Financing conditions still remain favorable, supported by the European Central Bank's accommodative monetary policy, particularly in the bank market, where lenders have capital to deploy. Even so, credit spreads have started to widen and investors are becoming more selective at the lower end of the rating spectrum. In the U.K., funding conditions appear tighter, mainly reflecting modest appetite for new borrowing by business and households.

Read our EMEA Credit Conditions Report


Credit conditions continue to be favorable in Asia-Pacific but risks emanating from the U.S. are increasing. Trade interruption risk is on the rise as the U.S. and China impose 25% tariffs on each other. Meanwhile, there appears to be upward pressure on interest rates and spreads, and investor sentiment points to a potential turn in the U.S. credit cycle.

After improving for the past three quarters, financing conditions in emerging Asia--while still favorable--may start to face headwinds later in the year.

Read our Asia-Pacific Credit Conditions Report

Latin America

Credit conditions in Latin America remain broadly favorable, but downside risks are increasing. On the bright side, credit conditions in the region still benefit from GDP growth, which we expect to be higher this year than in 2017, although a bit lower than we previously forecasted. A combination of external and domestic factors has resulted in falling currencies and tighter financing conditions. Pressure on the region's currencies could begin weighing on inflation levels and result in monetary tightening over the next few months.

Financing conditions remain neutral to slightly favorable in Latin America, but will likely face headwinds in the second half of 2018, especially among nonperforming loans. As interest rates rise, countries with higher exposure to international funding may face additional capital flow constraints, as investors may allocate capital to higher yielding securities in developed markets instead of emerging markets.

Read our Latin America Credit Conditions Report

COP24 Special Edition Shining A Light On Climate Finance


− Green loans are evolving, with the Climate Bond Initiative forecasting nearly $1 trillion in green bond issuance by 2020.

− Despite the uptick in green bond and loan issuance, the market still remains relatively small, especially compared to the universe of assets comprising CLO 2.0 transactions.

− In our view, a green CLO market has large growth potential, boosted by regulatory initiatives and emerging interest from both issuers and investors in 2018.

− We built a hypothetical rating scenario for a green CLO to compare and contrast the underlying portfolio and structure with a typical European CLO 2.0 transaction.

− Our hypothetical green CLO analysis showed that green loans may have different fundamental characteristics to corporate loans, such as lower asset yields, higher credit quality, and higher recovery rates assumptions.

The global collateralized loan obligation (CLO) market has experienced a rebirth (2010 in the U.S. and 2013 in Europe). New issuance continues to increase due to investor familiarity with the product, as well as low historical default rates. While a market for green assets, such as green loans and bonds has been established for a while, although still of a relative size, a sustainable securitization market is still in its infancy. Considering the challenge in financing the amounts, S&P Global Ratings expects green CLOs to play a role in increasing the private sector presence in the sustainable finance market.

Following the Paris Agreement that came into force in November 2016, 184 parties have ratified the action plan to limit global warming. For this purpose, developed nations have pledged to provide $100 billion (about €87 billion) annually until 2025. As part of this deal the EU has committed to decrease carbon emissions by 40% by 2030. In March 2018 the European Commission (EC) proposed the creation of environmental, social, and corporate governance 'taxonomy', regulating sustainable finance product disclosures, as well as introducing the 'green supporting factor' in the EU prudential rules for banks and insurance companies.

Read the Full Report

Turning Tides: The Future of Fuel Oil After IMO 2020

This report provides a thorough introduction to the IMO's sulfur cap on marine fuel, its impact on markets and what to expect from the new regulatory framework. Aiming to provide market-leading insight and analysis, S&P Global Platts outlines the regulation's impact on refiners and shipowners, analyzes how markets will adapt, and offers birds-eye view on how it could affect the environment.

The IMO’s lower sulfur cap is set to take away the bulk of marine fuel oil demand from the start of next year. Most shipowners and operators will switch to burning new low-sulfur bunker blends, meaning an almost overnight shift of 3 million b/d of demand.

The change poses a tough challenge to fuel oil producers, and prices are  expected to drop dramatically towards the end of 2019. Ships fitted with scrubbers to clean their emissions on board are set to benefit from this drop in their fuel bills, but only a small fraction of the global fleet are expected to invest in the systems by 2020.

LNG producers can expect to see some new demand for their product as an alternative marine fuel. But the IMO’s greenhouse gas strategy may hold back interest in LNG bunkering beyond the 2020s.

The global refining industry is investing in new units aimed at reducing fuel oil output and maximizing middle distillate production. Russian fuel oil exports in particular have fallen dramatically over the past two years.

But new sources of fuel oil demand can be expected to emerge in the coming years, partly offsetting the decline in marine demand. Saudi Arabia has already increased fuel oil consumption for power generation and its water desalinization plants, and Bangladesh is expected to become another key consumer.

2020 will not be the end of the road for fuel oil. A century after its first move to widespread adoption in shipping, fuel oil still has a significant role to play in the oil industry.

Read the Full Report

S&P Global Ratings' Global Outlook 2019

 A deep dive into S&P Global Ratings’ insights on the credit outlook for 2019 and what are the risks and vulnerabilities to look out for.

Access all the Global Outlook
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Energy: What to Watch in 2019


S&P Global Platts Analytics Issues Two Special Reports

Pricing across the global energy markets will face headwinds in 2019, with a weaker and more uncertain macroeconomic framework deflating price formation in general, according to two special reports just issued by S&P Global Platts Analytics. Such headwinds will require the industry and portfolio managers to take a big-picture approach.

See the Executive Summary of the S&P Global Platts Analytics special report 2018 Review and 2019 here. Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here.

"One of the key lessons learned in 2018, painfully by some, is that market sentiment can shift violently without much change in fundamentals, requiring a steady, holistic perspective," said Chris Midgley, global head of analytics, S&P Global Platts. "It is clear that this volatility will remain a feature across the energy markets in 2019, particularly as IMO 2020 nears."

Particularly blustery headwinds are in store for markets where prices finished 2018 at elevated levels, and well above costs, such as North American natural gas and global coal. However, if the supply side can adjust to the reality of slowing demand growth, energy prices can find support. For natural gas liquids (NGLs), the ongoing logistical constraints at the US Gulf Coast are likely to manifest on continued price volatility, particularly for ethane and liquid petroleum gas (LPG), over the next year despite strong global demand.

LPG, such as propane and butane and used in transportation fuel, refrigeration, heating and cooking, is rapidly facing US export capacity constraints, especially along the US Gulf Coast. For LPG feedstock propylene, there is clear potential for high volatility globally over the next 12-18 months.

Analysts at S&P Global Platts see weakening prices of Henry Hub natural gas. The slowdown in US demand growth will exceed that of supply. But if winter temperatures prove to be colder than normal, near-term prices will need to move higher to bring on enough supply to replenish depleted storage levels.

For global liquefied natural gas (LNG), it will be end-user-backed LNG demand that faces particular struggle to cope with the speed and force of new supply entering the market in 2019. Non price-responsive demand in Asia will be easily met and JKM spot physical prices (reflecting LNG as delivered into Japan, Korea and China) will sag next year.

Access the full S&P Global Platts Analytics Top Factors to Look Out For in 2019 for Energy here. Among the 22 key take-away themes:

  • NGL supply growth will strain the North American energy system
  • Saudi Arabia will need to be nimble to balance 2019 oil supply
  • US oil supply limited by pipelines
  • Oil demand slowing: trade war, industrial slump
  • 2019 LNG supply additions largest since the Qatari mega-trains
  • US gas supply growth to exceed demand growth even with LNG exports
  • Global solar growth slowing
  • Shipping disruption looming - IMO 2020
  • New Russian gas pipeline advantage over Ukraine
  • US coal demand to decline again in 2019
  • Growth in new refineries and complex capacity likely to weigh on refinery margins especially in Asia

Year 2019 will certainly be one of transition for crude and refined oil products as it will lead into 2020 when roughly three million barrels per day of high-sulfur fuel oil must be “destroyed” (including enhanced usage of HSFO in power generation) due to the International Marine Organization (IMO) mandate of eco-friendly shipping fuels in use at sea. A similar amount of middle distillate/low sulfur fuel must be created (by refinery changes and by running more crude oil. The increase in refinery capacity between now and 2020 is large, but mostly needed to cover normal demand growth. Expect prices of light sweet crudes to be bid up in 4Q19.