NEW YORK--(BUSINESS WIRE)--Spreads on five-year credit default swaps (CDS) on BP Plc widened by 33% in March, underperforming peers and Fitch's European Oil and Gas CDS Index, which widened just 10% during the same period, according to Fitch Solutions. Growing market concern reflected in the wider BP CDS is likely driven by its investment in Russia's largely state-owned OAO Rosneft amid potential sanctions arising from the Ukraine conflict.
CDS liquidity for the UK's flagship oil and gas producer has increased slightly over the past few trading sessions, from the 26th regional percentile on March 25 to the 19th percentile as of March 31. Increased CDS liquidity for an issuer typically signals increased market uncertainty over future pricing levels.
CDS of BP peers outperformed their competitor last month, with Eni SpA CDS tighter by 6%; Total SA CDS wider by 7%, and Royal Dutch Shell plc CDS wider by just 6%.
The suggested negative shift in market sentiment for BP highlighted by CDS levels does not signal a rating change. Fitch continues to believe that the direction of BP's credit rating ('A' IDR) heavily depends on the outcome of its legal proceedings, as large legal uncertainties remain. On a broader basis, revenue growth is slowing across the EMEA oil and gas sector from a combination of stable prices and declining production volumes. Nearly all the western European oil companies rated by Fitch reported a year-on-year decline in upstream output of between 3% and 5% in 2013.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.