Having surged on Tuesday when the Iran "deal" was confirmed and tumbled yesterday despite inventory draws and production decreases, WTI crude is re-slumping back to a $50 handle this morning as traders cite more Iran concerns (flattening the curve) and a Genscape report that indicates inventory builds at Cushing once again...
It appears the algos have been turned upside down...
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As we noted previously, worries over Shale Oil company indebtedness are resurging... [6]
“The energy sector of the high-yield market continues to be a silo of misery,” Margie Patel with Wells Capital Management, told Bloomberg telephone interview. “If we stay near these levels, marginal high-cost producers won’t be able to survive.”
Bonds due in 2020 for Energy XXI, a driller in Louisiana, are now trading at 84.5 cents on the dollar, and Oklahoma-based SandRidge has seen its debt fall to 87 cents on the dollar.
The markets will get a clearer picture as second quarter earnings season arrives, as indebted shale companies provide some clues into their ongoing struggles.
However, the outlook moving forward may be gloomier than whatever they report in the second quarter.
Charts: bloomberg
