Rating firm Fitch sees no near-term impact of UAE exit from OPEC

LONDON: Credit rating firm Fitch said that this week’s decision by the United Arab Emirates to withdraw from OPEC would have no immediate impact on the country’s metrics, although it could boost its oil revenues in the longer term.

“In the near term it doesn’t make any difference at all,” Paul Gamble, Fitch’s head of Middle East sovereign ratings, said of the OPEC exit during a webinar on Thursday, citing the effective closure of the Strait of Hormuz’s huge impact on its oil exports.

Once the strait fully reopens, though, Gamble said the UAE was likely to ramp up oil exports, given it would no longer be limited by OPEC decisions.

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That would help its “balance sheet” although diversifying the economy away from oil and an improvement in the “geopolitical risks” are still likely to be needed to lift the UAE’s AA- stable credit rating.

Fitch’s score is already one notch lower than both S&P Global and Moody’s respective ratings on the country.

“I don’t think it (an increase in oil exports) would put any upward pressure on the rating,” Gamble said, although “it would definitely help the sovereign balance sheet.”

He added that he viewed the UAE’s recent request for a currency swap line with the U.S. as a “proactive” move, albeit a “surprise” timing-wise given the huge amount of liquid assets that the UAE has.

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“Clearly the UAE has liquidity needs at the moment. A swap line is another way of accessing this liquidity, rather than selling off a big pile of Treasuries (U.S. government bonds) or something like that.”

“But it’s very much precautionary and for us, it’s not a sign of a problem.”