A fourfold increase in energy companies’ debts since 2003 may have deepened last year’s oil-price rout as firms delayed curbing output and sold futures contracts to hedge against the slump, according to the Bank for International Settlements.

Energy companies’ outstanding debts rose to more than $800 billion this year from less than $200 billion in 2003, the Basel-based institution said in a report on Feb. 7. Sinking oil prices weakened the value of assets used as collateral by producers and compelled them to sell more of their output on futures markets, it said.

Brent crude oil, a global benchmark, fell 60 percent between June and January, as members of the Organization of Petroleum Exporting Countries refused to cut their own oil production in response to the highest U.S. output in three decades. The price has since rebounded more than 20 percent amid speculation that traders closed bearish bets and U.S. drillers idled the most oil rigs in a week ever.

“Changes in production and consumption seem to fall short of a fully satisfactory explanation of the abrupt collapse in oil prices,” said BIS, which is owned by central banks. “The greater debt burden of the oil sector may have influenced the recent dynamics of the oil market” and contributed to the slide, it said.

Borrowing Costs

Tumbling oil prices have increased borrowing costs among energy companies, with spreads on high-yield bonds issued by energy firms soaring to 800 basis points as of January, from 330 points in June, according to the BIS.

This encouraged energy companies to both lock in forward prices, adding to the selling pressure, and to keep production levels elevated to sustain revenues, prolonging an oversupply, the BIS said.

The expansion in borrowing by energy firms outpaced total debt issuance since 2003, which has tripled in the period to about $6 trillion, according to the report.

The level of borrowing in dollars by energy companies outside the U.S. may also push prices lower, as a strengthening dollar makes it harder for firms based in emerging nations to pay off their debt, the BIS said.