$60 Oil Drives Energy Debt Down, Even If Unwarranted (video)

The recent drop in oil prices, driven by trade tariffs and increases in OPEC+ production plans, has made energy the worst performing industry group in the Bloomberg High Yield Corporate Bond Index year-to-date. At about $60 a barrel, oil prices have fallen to the point where North American producers may start cutting spending to preserve cash and a sustained downturn towards $55 a barrel could put up to $51 billion of high grade debt at risk of becoming fallen angels. Bonds issued by natural gas producers have also sold off, even as companies expect to benefit from a 125% increase in prices since 1Q24 robust free cash flow expectations.