TORONTO (miningweekly.com) – Oil-exporting countries heavily reliant on oil revenues and committed to large spending programmes were most likely to have difficulty accommodating low oil prices, Moody's Investors Service said on Wednesday.

In its report ‘Global oil price volatility: Oil-exporting sovereigns with limited policy tools are most exposed’, Moody’s found that lower oil prices would, on balance, be a positive for global economic growth in 2015, although the exact impact would vary from country to country.

However, the fall in prices presented oil-exporting sovereigns with challenges, which would be worsened if crude oil prices were to fall significantly below Moody's base case forecast of $80/bl to $85/bl for 2015.

Brent crude oil on Wednesday fell 4.16% to $64.06/bl, below $65 for the first time in more than five years after the Organisation of the Petroleum Exporting Countries (Opec) cut the demand forecast for its crude oil to a 12-year low. West Texas Intermediate crude dropped 4.39% to $61.02/bl as a result of growing US inventories.

“In either case, the sovereigns that are best placed to withstand those challenges will be those that have the greatest policy flexibility and a wide array of counter-cyclical policy tools, including floating exchange rates and large foreign exchange reserves," Moody's MD, chief economist and report author Lucio Vinhas said.

In November, Moody's revised its oil price forecast down to between $80/bl and $85/bl in 2015, about $20 lower than the rating agency's May estimate. Oil prices remained high by historical standards, despite a nearly 30% fall in crude oil benchmarks since June.

The challenges for oil-exporting sovereigns would increase should prices fall still further, Moody’s said. Big-spending oil exporters, most heavily reliant on oil revenue and with the lowest capacity to make necessary policy adjustments would be most negatively affected.

The advisory firm fingered Russia and Venezuela as falling into this category, owing to them deriving a large share of revenues from oil and having large recurring expenditure that might be politically challenging to cut.

In contrast, oil producers that used oil-related revenues for capital expenditure or placed it in a reserve, such as Saudi Arabia, had higher fiscal buffers and could adjust more readily to a lower oil price.

Mexico would also be resilient to a lower oil price given its limited exposure to oil in its external accounts and its conservative budget policy.

Moody’s reported that oil importers would also be positively affected, although not equally so.

Those that are battling high inflation and large oil subsidy bills, such as Indonesia and India, would benefit most from a lower price environment.

For China, a $60/bl oil price would benefit private consumption and economic rebalancing, and somewhat moderate the ongoing growth slowdown. In the US, a $60/bl oil price and increased domestic production would support the balance of payments and private consumption through increased spending power.

For Morocco, lower oil prices would support further energy subsidy reforms and help reduce fiscal and current account deficits.