Yesterday, WTIC — that's US oil — just broke under $60 a barrel on very heavy volume. Canada heavy crude is at $42 a barrel, and Brent is at $61.73.
All of these are multi-year lows not seen since the great oil crash of 2008 that preceded the even greater financial crash that came just a few months later.
Are we headed for another financial accident? I don't know, but the warning signs are all there. This is really beginning to smell like 2008 all over again.
Back then it was the losses in sub-prime mortgage derivative products that became the pin the pricked the bubble.
This time? We might do worse than to note that there's a massive amount of similarly-graded junk debt in the energy sector:
Fed Bubble Bursts in $550 Billion of Energy Debt
Dec 11, 2014
The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.
Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG.
With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year.
“Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”
Yields on junk-rated energy bonds climbed to a more-than-five-year high of 9.5 percent this week from 5.7 percent in June, according to Bank of America Merrill Lynch index data.
by davefairtex 
