Falling oil prices have begun to hurt well permits, shale lenders, and U.S. corporate junk bond funds. Fred Katayama reports.
The sharp decline in oil prices is starting to take its toll. For shale oil in the US, permits for new wells dropped 15 percent in October ... the first sign of a slowdown, according to exclusive data obtained by Reuters And it does not end there. Share prices of banks lending to the shale industry kept sliding after being slammed on Friday following OPEC's move to maintain current production levels. BOK Financial, which has the biggest percentage of energy exposure among the banks RBC Capital covers, is down nearly 10 percent over the last two sessions. Cullen/Frost Bankers is off more than 7 percent. RBC analyst Jon Arfstrom said, "... energy lenders believe that the majority of their clients are well-hedged through 2016 ... However, the likelihood of a slowdown in activity, think drilling/servicing, is very possible if prices remain depressed and/or move lower." Sliding oil prices have also hurt prices of U.S. corporate junk bond funds. Energy companies issued junk bonds to fund shale production, and investors are worried they won't be able to repay their debt. Crude oil is falling in early trading after bouncing back Monday. It's down 36 percent since late June. However, there is an upside. The IMF said falling oil prices are a positive for the global economy. And the financial weekly, Barron's, says the panic is near an end, oil is oversold, and it's time to buy.