The collapse in crude oil prices may have reduced revenues of oil exporters, but it has not soured their appetite for U.S. government debt.
Saudi Arabia and other major oil exporters have increased their holdings of U.S. Treasuries to record levels in an effort to counter the effect of the 60 percent drop in oil prices in the last nine months.
Global financial assets such as U.S. Treasuries, corporate debt, and equities have benefited from soaring oil prices over the last decade as producers funneled their oil windfall into these markets.
With the dollar hovering near a 12-year peak against a basket of currencies, OPEC and oil exporters are hedging the drop in their oil income from profits on a rising greenback. Crude prices fell to a six-year low this week.
Oil exporters' holdings of U.S. Treasuries grew to a record $290.80 billion in January from $285.9 billion in December, according to U.S. Treasury data.
"There is a strong portfolio argument for oil producers to use long dollar exposure as a partial hedge against weaker oil prices, not to mention the need for dollar reserves to help protect dollar pegs," said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.
Since June, those nations' Treasuries holdings have risen 12 percent, slightly faster than the 10 percent pace in the first six months of 2014 when oil prices, which are priced in U.S. dollars, were running above $100 a barrel.
"These oil exporters are getting more defensive. They're probably reducing their equity exposure and moving to more liquid investments such as U.S. Treasuries in anticipation that they might need to run down their reserves," said Nikolaos Panigirtzoglou, global market strategist at JP Morgan's global asset allocation group in London.
He said that if oil prices drop, these countries' reserves would be used to stabilize their currencies in order to hold down the domestic costs of imported goods.
"They're also probably trying to ride the strong dollar trend," Panigirtzoglou said.
Panigirtzoglou expects oil exporters to buy fewer global bonds for the rest of this year, including U.S. Treasuries, as oil revenues shrink.
J.P. Morgan, in a research report, said it expects oil revenues from oil producers to decline to $750 billion this year, assuming an average oil price of $50 per barrel, from $1.5 trillion in 2014. Last year, J.P. Morgan estimated the average oil price to be $100 per barrel.
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