[Editor's note: A version of this story appears in the March 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]

In the final quarter of 2018, what for several months had seemed like an improving, albeit uncertain, environment for capital raises came crashing down. Another year of commodity volatility seems likely for 2019, with its attendant impact on capital markets.

When the price for West Texas Intermediate crude fell by year-end 40% from its Oct. 3 peak, a near shutdown of capital markets was almost inevitable. Concerns about a number of factors—weakening economic growth, U.S.-Sino trade friction, unexpectedly large waivers granted to buyers of Iranian oil, plus various wildcard issues—combined to create a severely negative market sentiment.

Equity issuance in the energy sector, already on a downward spiral early in the fourth quarter, evaporated in December. Likewise, issuance of debt followed a downward path, with energy high yield—accounting for about 16% of the high-yield market—particularly affected. By December, no high yield paper, from energy or other issuers, had come to market.

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