BPwill survive the debacle in the gulf, yet the oil giant will remain impaired years down the road, said Paul Smith, chief risk officer at Mobius Risk Group, which owns a commodity advisory firm.
“The credit default swaps are skyrocketing right now and the market is concerned about the ability of [BP ] to perform on debt a little bit more than they were six weeks ago,” he said. “Our perspective is that the unknowns with respect to the liabilities are too great right now. The equity market is saying, ‘we don’t want to own the stock right now.’ The credit default swaps are saying ‘the bonds are more risky.’”
The BP spill will lead to higher oil pricesin the long-term, said Smith.
“We're bears in general on energy prices in the front-end, but this is clearly a bullish signal.... in the back-end," said Smith, who suggested that the fallout from the spill could help push oil prices higher between 2013 and 2015.
One reason is because the spill will have repurcussions for deepwater drilling in the Gulf of Mexico. At the moment, he said he expects the six-month moratorium on deepwater drilling in the gulf will send rigs overseas to Africa and South America.
Mobius Risk Group does not consult to BP.
BP shares extended their recent lossesas investors worried the worsening disaster in the Gulf of Mexico would force the company to suspend its dividend.
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