Oil Firms’ Debt Is Helping Drive Prices Lower, BIS Says

High levels of borrowing at many energy-sector firms may be magnifying a historic slump in the oil markets, according to a new report from the Bank for International Settlements.

This has created a vicious cycle in which companies are forced to keep up productionto meet short-term debt obligations even as prices fall, exacerbating the downturn, the BIS says in its latest quarterly review of world financial conditions. The BIS, based in Basel, Switzerland, is an international organization of central banks.

Debt in the oil and gas sector surged to $2.5 trillion last year from $1 trillion in 2006, according to BIS economist Dietrich Domanski and his three co-authors .... http://blogs.wsj.com