If the global economy is a super-organism, this oil glut feels like a haemorrhage, with blood pooling internally. Circulation is weakening, with less oxygen and nutrients being carried to the muscles and organs as they shut down.
“Oil prices could turn negative in some parts of the world as demand continues to collapse, with Russia and the US set to be the biggest losers from the crash.
“In landlocked regions where maintaining an oil well no longer makes financial sense, producers could be forced to pay just to get rid of their oil, according to analysts at Goldman Sachs. This would be cheaper than shutting down wells, they add.
“Around the world, producers are capping output because there is nowhere to send the oil, referred to as a “shut-in”. Storage space is almost full and demand has been decimated by social restrictions implemented to battle the spread of coronavirus.”
https://www.telegraph.co.uk/business/2020/03/30/oil-prices-sink-17-year-low/
“A pint of good beer up in Canada will probably cost you about $5 bucks. You can now get a barrel of oil for less than that.
“Traders tell me that the price of Western Canada Select (WCS) is being quoted at $4.18 per barrel as of this writing. A “wouldn’t have believed it if I hadn’t seen the trade screen myself” kind of situation. But there it was.”
https://www.cnbc.com/2020/03/30/a-barrel-of-oil-is-now-cheaper-than-a-pint-of-beer-in-canada.html
“U.S. energy producers face the threat that banks will slash their credit as March’s crash in oil prices means the asset backing their main loan facility – crude reserves – is worth less than half of what it was a month ago.
“The oil price collapse has crushed U.S. energy companies, sending valuations spiraling and squeezing financing options…”
“This year, $4.1 trillion worth of corporate debt is due to mature and around $1.3 trillion of that is speculative grade.
“An estimated one in six U.S. companies didn’t have the cash flow to cover their interest payments at the best of times—imagine what that figure looks like now that most have shut their doors. Now imagine how it will look a few months into a recession.
“What we’re seeing now as banks plead with customers to tap existing credit sparingly are warnings signs for what’s to come.”
https://www.ccn.com/banks-tell-businesses-not-to-tap-their-credit-lines-in-recession-fueled-panic/
“Big banks that help asset managers package risky loans into investment products are sitting on billions of dollars of debt linked to companies most exposed to an economic downturn.
“Lenders on both sides of the Atlantic have upwards of 100 open credit lines to vehicles known as collateralised loan obligations, which are among the biggest sources of funds for businesses that do not have top-quality credit ratings, according to people familiar with the arrangements.”
https://www.ft.com/content/49ee0c64-cd97-4342-9f03-fec019963fef
“66% of UK retail businesses have a pre-existing loan, according to new figures released by invoice finance firm MarketFinance.
“Meanwhile, 35% are on the hook for between £50,000 and £100,000. The news comes as retail businesses throughout the UK have dealt with their first week of store closures.”
“[UK] Payday lenders have started to suspend new loans and tighten lending rules because of fears that low-income borrowers will not be able to afford repayments during the coronavirus crisis.
“Doorstep lender Morses Club became the latest high cost creditor to withdraw loans for new customers on Monday.”
“Two decades since the euro began, one of the principal worries of its founders is materializing as the coronavirus rages through the region’s third-largest economy.
“The longstanding suspicion that Italy’s profligate borrowing could ultimately become the whole of Europe’s problem was the recurring nightmare of German finance officials throughout the 1990s.”
“A member of the Lebanese banking association, who asked to remain anonymous, told AFP all dollar withdrawals would be halted “pending the airport reopening”.
“”Dollars are imported and this is no longer possible because of the coronavirus,” the source said. “Dollar importers have suspended work.””
“Egyptian banks have been instructed to apply temporary limits on daily withdrawals and deposits in a move seemingly designed to control inflation and hoarding during the coronavirus’ spread.
“The daily limit for individuals would be 10,000 Egyptian pounds ($635) and 50,000 pounds for companies, a central bank statement said.”
“South African bonds will now be removed from indices used worldwide to track investment-grade debt, adding to pressure on the currency as some investors will be forced by their mandates to sell their holdings.”
https://www.ft.com/content/b4a074ca-f664-4fcf-92f9-949413264294
“Last week, S&P Global Ratings downgraded over 70 Mexico government bonds, over 20 Ecuadorian bonds, and some Colombian government debt, too. Argentina was left alone. That’s because it is already super duper junk. If it goes any lower, it’s a hard default.
“Within Latin America, Argentina is the one country looking set to follow in Venezuela’s footsteps and go bust.”
“Brazil’s government is considering a possible emergency loan package for energy distributors that are struggling with lower energy use and facing lost revenues due to the coronavirus outbreak, an industry group told Reuters on Monday.”
“An exodus from emerging markets (EM) assets has been taking place thanks to a combination of the coronavirus outbreak and falling oil prices.
“Investors are opting to park their capital into safer havens, which puts EM companies at risk of default. This was readily apparent in rising yields on EM debt as the countries in the most tenuous positions headed toward distressed levels.”
“One in three Americans say a household member has been laid off or had their pay cut.
“Sometimes direct data on a problem like unemployment can underestimate the share of people affected; after all, whole families, households, and communities can be hurt badly by a single person’s layoff.”
https://www.vox.com/future-perfect/2020/3/30/21184401/coronavirus-covid-19-economy-charts
“Deal activity last week totalled just $12.5bn, the lowest weekly total since the nadir of the financial crisis in April 2009. The overall value of deals in the first quarter fell 28 per cent from a year ago to $698bn…”
https://www.ft.com/content/08119ae1-b0c8-4cd3-b4b8-b38c8b252f8d
“Copper miners are poised for their worst quarter since 2008 after the coronavirus pandemic fueled demand fears for industrial metals and forced companies to curb mining operations.”
“The coronavirus pandemic will plunge the world into a deeper recession than the financial crisis from which the global economy will never fully recover, a leading consultancy has said.”
https://www.thetimes.co.uk/article/global-economy-will-never-fully-recover-phprqpf3r
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