News / Business

Plunging oil fans fears of bankruptcy among US firms

Tuesday, 12 January 2016 7:26 PM [ Last Update: Tuesday, 12 January 2016 7:27 PM ]

Concerns are rising in the US that falling oil prices may lead almost a third of US oil firms toward bankruptcy.

The continuing plunges in the prices of oil have sparked fears in the US that almost a third of oil enterprises in the world’s leading economy could go bankrupt in 2017.

Over 30 US oil companies, which collectively owe $13 billion, have already filed for bankruptcy protection due to the rapidly falling crude prices, The Wall Street Journal reported, citing Haynes & Boone law firm.

Brent crude prices plunged more than 5 percent on Monday, reaching a 12-year low of $31.41.

Morgan Stanley, Goldman Sachs Group and Citigroup investment banks expect the price of oil to fall below $30 in the near future.

US oil producers will have to cut their expenditure by 51 percent compared to 2014 levels, to $89.6 billion, the WSJ quoted Cowen & Co researchers as warning.

Survival, for some, would be possible if oil rebounded to at least $50, according to analysts as highlighted by the newspaper.

The current downturn is now deeper and longer than each of the five oil price crashes since 1970, said Martijn Rats, an analyst at Morgan Stanley.

Together, North American oil-and-gas producers are losing nearly $2 billion every week at current prices, according to a forthcoming report from AlixPartners, a consulting firm, that is set to be published later this week.

“Many are going to have huge problems,” said Kim Brady, a partner and restructuring adviser at consultancy Solic Capital, as quoted by the newspaper.

China’s economic slowdown, the US currency’s appreciation and the fact oil companies worldwide refuse to stop drilling for more oil are listed as reasons for the plummeting prices.

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