Oil prices: Time for (nasty) second-round effects?

Oil prices plummeted to a 12-year low in January on the back of large oversupply (60%), sluggish expected demand - especially from China - (30%), and speculation (10%). However, more than the spot price, the problem became the duration of this counter oil shock.

The gap between winners and losers widened: While India may gain +0.25 GDP point this year, Venezuela is losing -3.4 points.

Second-round effects started to kick in: widening current account deficits (-26pps for Saudi Arabia and Venezuela, between 2014 and 2016 for instance); depreciating currencies and declining fiscal space caused higher credit risk; depleting reserves (Equatorial Guinea, Gabon, Angola, Oman and Venezuela) remind the world of the risk of default; and last, the risk of social unrest increased (Venezuela, Russia, Algeria).

Sector wise, the Energy and Machinery sectors are direct victims of this protracted period of low oil prices (USD200bn of lost CAPEX in the oil sector). Construction and Retail suffer from collateral damage.