Oil prices crashed to new lows on Wednesday. Persistently low prices could force some independent producers to write down debt or even file for bankruptcy. Leah Duncan reports.
U.S. crude plunged to fresh lows on Wednesday, sinking more than seven percent and dipping below $27 a barrel for the first time since 2003. But these new lows could mean more than just another market milestone. For many shale producers, it may mean bankruptcy, debt write-downs, or even fire sales, if low oil hangs around for much longer. Several analysts say, many independent oil producers need oil to rebound to $40 to $60 a barrel just to break even. Associate Andrew Lebow of Commodity Research Group: SOUNDBITE: ANDREW LEBOW, ASSOCIATE, COMMODITIES RESEARCH GROUP (ENGLISH) SAYING: "Some of these independent producers had hedged at higher price levels which gave them some relief on cash-flow, but, unfortunately, a lot of those hedges are now rolling off over the next few months, so they are definitely going to be on the defensive. They are already on the defensive. And we are probably going to see some of them go under, unfortunately." Independent producer Devon Energy was forced to write down the value of its oil and gas reserves. Over the past year the company has taken $15.5 billion in non-cash charges, and its shares have lost almost seventy percent of their value. And there is little indication of a bottom. On Tuesday, the International Energy Agency warned that the world could "drown in oversupply" of oil in 2016.