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Oil price slump to trigger new US debt default crisis as OPEC waits
By Andrew Critchlow
The Telegraph, London
Friday, November 14, 2014
Remember the global financial crisis, triggered six years ago when billions of dollars of dodgy loans -- doled out by banks to subprime borrowers and then resold numerous times on international debt markets -- began to unravel and default?
Stock markets plunged, banks collapsed, and the entire global financial system teetered on the brink of catastrophe. Well, a similarly chilling economic scenario could be set off by the current collapse in oil prices.
Based on recent stress tests of subprime borrowers in the energy sector in the US produced by Deutsche Bank, should the price of US crude fall by a further 20 percent to $60 per barrel, it could result in up to a 30 percent default rate among B- and CCC-rated high-yield US borrowers in the industry. West Texas Intermediate crude is currently trading at multi-year lows of around $75 per barrel, down from $107 per barrel in June.
"A shock of that magnitude could be sufficient to trigger a broader high-yield market default cycle, if materialised," warn Deutsche strategists Oleg Melentyev and Daniel Sorid in their report. ...
... For the remainder of the story:
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/1123138...
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