Debt Pile-Up To Fuel Further Oil Price Pressure

From Zerohedge.com:

Meanwhile, the very act of continuing to drill puts more pressure on prices, imperiling the companies even further and encouraging still more debt issuance, which leads to more drilling and so on and so forth.

This is exacerbated by the fact that the more debt you take on, the more interest expense you incur, adding further incentive to drill, drill, drill.

In short: the entire sector is digging itself a hole (no pun intended).

This is a microcosm of the dynamic that’s taking place in the macroeconomy.

Those with access to easy money overproduce without witnessing a concurrent increase in demand from those to whom the benefits of ultra loose monetary policy do not immediately accrue.

Defaults are averted when troubled companies tap yield-starved investors for cash, which leads to further excess capacity, still more pressure on prices, still lower yields, further herding into risk assets, and around we go.

Citi’s Matt King recently described this as “creative destruction destroyed” and as the process by which “zombies are born...”
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Link: http://www.zerohedge.com/news/2015-04-28/debt-pile-fuel-further-oil-price-pressure