LONDON Nov 3 Energy-exporting countries are set
to pull their "petrodollars" out of world markets this year for
the first time in almost two decades, according to a study by
Driven by this year's drop in oil prices, the shift is
likely to cause global market liquidity to fall, the study
Brent crude futures have fallen 23 percent this year, with
2014 promising to be only the second year since 2002 that crude
prices will end the year lower than they began it.
This decline follows years of windfalls for oil exporters
such as Russia, Angola, Saudi Arabia and Nigeria. Much of that
money found its way into financial markets, helping to boost
asset prices and keep the cost of borrowing down, through
so-called petrodollar recycling.
This year, however, the oil producers will effectively
import capital amounting to $7.6 billion. By comparison, they
exported $60 billion in 2013 and $248 billion in 2012, according
to the following graphic based on BNP Paribas calculations:
Petrodollar recycling peaked at $511 billion in 2006, BNP
"At its peak, about $500 billion a year was being recycled
back into financial markets. This will be the first year in a
long time that energy exporters will be sucking capital out,"
said David Spegel, global head of emerging market sovereign and
corporate Research at BNP.
In other words, oil exporters are now pulling liquidity out
of financial markets rather than putting money in. That could
result in higher borrowing costs for governments, companies, and
ultimately, consumers as money becomes scarcer.
Spegel acknowledged that the net withdrawal was small. But
he added: "What is interesting is they are draining rather than
providing capital that is moving global liquidity. If oil prices
fall further in coming years, energy producers will need more
capital even if just to repay bonds."
The reversal is largely down to Russia and the rest of the
ex-Soviet Union, which BNP estimates have withdrawn $57 billion
from world markets.
Russian companies have been shut out of global markets since
Western countries imposed sanctions because of the conflict in
Ukraine. Those companies are increasingly forced to rely on
their own cash reserves or central bank funding to meet external
(Reporting by Chris Vellacott; Editing by Larry King)