Impact of oil prices on sovereign CDS spread

Abstract

Price of the global commodity like oil impacts both the importing and exporting countries. Recent, slump in oil prices of the level of around 75 percent compared to mid-2014 level is caused majorly by factors like excess production by OPEC countries over set ceiling, higher shale oil production in US and economic slowdown in China. The economy of oil exporting countries like Saudi Arabia, Venezuela are too much dependent on the export of oil and prices of oil, on the other hand, higher oil prices causes higher trade deficits for the oil importing countries like India. Oil being one of the highest used commodity in the world can significantly impact global as well as various economies in the world.