Doesn't the US produce more oil than SA?
Doesn't the US produce more oil than SA?
Because oil is a fungible product, flooding the market by the Saudis brings prices down all over the world.
I don't think this is a long term problem because Saudi Arabia can only afford to flood the market for just so long (they are already having cash flow problems) and the oil is still in the ground in the U.S.
Any defaults will first wipe out the equity investors...the debt holders still have a claim to the oil in the ground to the extent they are secured.
That said, bankruptcies of drillers will begin to affect debt holders after equity is wiped out based on the seniority of debt (i.e. junior/unsecured/junk liens are wiped out first, then up the ladder to senior debt holders last--if at all)