An oil worker fills oil barrels at an Iraqi refinery. A Swiss bank says the debt crisis has the potential to crater oil prices. (Faleh Kheiber/Reuters)A major Swiss bank says the European debt crisis has the potential to push the price of oil down to $50 US per barrel.
In a research note Wednesday, Credit Suisse says its "worst case scenario" for the crude market and global economy would be a repeat of the 2008 financial crisis, only this time predicated on European sovereign debt problems.
Should that happen, the drop-off in demand for oil would quickly push the price of a barrel of oil to $50 and keep it below $80 for the next two years after that.
It's believed that the breakeven point for most oil operations in Alberta's Athabasca oilsands basin is roughly $60 per barrel.
"We include a seemingly outlandishly bearish oil price scenario because it is a simple fact that a little more than three years ago prompt Brent futures prices had fallen to $46 a barrel … from a record high of $123 a barrel … in less than a year," the bank said.
The dire prediction "is simply a fatalistic repeat of history on the premise that what was broken three to four years ago has not been fixed," the bank said.
While the bank makes it clear the $50 prediction is an unlikely but possible scenario, the bank did downgrade its base-case scenario for the price of Brent to $106 a barrel, down from $118 in its precious update.
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