Plunging prices could force a third of U.S. oil firms into bankruptcy

Drillers from Houston to Riyadh won’t quit pumping despite the oil glut.

Drillers from Houston to Riyadh won’t quit pumping despite the oil glut.

Crude-oil prices plunged more than 5% on Monday to trade near $30 a barrel, making the specter of bankruptcy ever more likely for a significant chunk of the U.S. oil industry.

Three major investment banks — Morgan Stanley MS, -4.18% , Goldman Sachs Group Inc. GS, -2.12% and Citigroup Inc. C, -1.81% — now expect the price of oil to crash through the $30 threshold and into $20 territory in short order as a result of China’s slowdown, the U.S. dollar’s appreciation and the fact that drillers from Houston to Riyadh won’t quit pumping despite the oil glut.

As many as a third of American oil-and-gas producers could tip toward bankruptcy and restructuring by mid-2017, according to Wolfe Research. Survival, for some, would be possible if oil rebounded to at least $50, according to analysts. The benchmark price of U.S. crude settled at $31.41 a barrel, setting a 12-year low.

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