Business

February WTI Crude futures have plunged to new cycle lows at $28.60 (down 2.7%) as Iran supply looms over an already over-glutted global crude market. Brent is down even more (-3.7%). Dow futures are down 60 points at the open.

• *WTI OIL FALLS AS MUCH AS 2.7%, BRENT CRUDE DROPS 3.7%

Feb futures (which have just rolled) are under $29...

And the new on the run March contract is trading $29.60, down 2.6%...

Weighing on US equities... Dow futures down 65 points

Yesterday, we reported exclusively how the Dallas Fed is pulling strings behind the scenes to conceal the fallout from the oil market crash. As Dark-Bid.com's Daniel Drew notes, by suspending mark-to-market on energy loans and distorting the accounting, they are postponing the inevitable as long as possible.

When Wells Fargo reported its Q4 earnings last week, the one topic analysts and investors wanted much more clarity on, was the bank's exposure to oil and gas loans, and much more color on its energy book over concerns that Wells, like most of its peers, was underestimating the severity of the upcoming shale default wave.

Credit markets have been warning of a looming crisis for months...

And as the cost of protecting against credit collapse has soared so the cost of protecting against equity downside (VIX) has started to awaken:

However, as we detailed previously, more than a few market participants have turned to deep out-of-the-money options to protect themselves against drastic downside (pushing the skew - the relative cost of crisis protection over 'normal' protection - to record highs).

Exceprted from Doug Noland's Credit Bubble Bulletin,