Oil Plunges and Natural Gas Soars, What to Make of These Extreme Moves

Market Impact

The stock prices for energy companies have been damaged due to the decline in oil prices, and it’s causing a sharp rise in yields in the corporate bond market.  The energy sector accounts for about 15% of the entire U.S. high-yield bond index.
Source: Bloomberg

It would seem that the jump in natural gas prices is mostly seasonal, and the negative impact on consumers could be mostly offset with lower gasoline and heating oil costs.

But if oil is declining because of a slowdown in global growth, this will impact not only oil producing countries, but also impact the bond market, creating a higher borrowing costs, which could lead to defaults, which in turn could have a ripple effect across other financial markets.

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