As those with oil heating celebrate the lowest oil prices for many a winter, it is becoming increasingly obvious that the control of the oil market has passed from OPEC to the world’s credit markets. No major oil producer or company is economically self-sufficient at present, based on revenues from oil alone, so bankers rather than oil men are now in charge.

The idea that bank loans to oil companies may be dicey is not new, but there are signs that these distress energy loans could end up as messy defaults. Although nations like Saudi Arabia won’t forfeit their assets to creditors, their ability to keep running deficit funding is going to depend more and more on the appetite of the bond market for energy related debt, creating problems in 2016.

With the Federal Reserve beginning to raise interest rates, bond investors may feel they do not need to invest in energy debt as they have in 2015, which in turn could start to affect oil production.

Although some economists may still believe cartels have the power to control oil production, it is beginning to look like the only group with the clout to curtail or expand production is the major banks that control capital market flows. This production power is indirect, but it is nonetheless very real.

Although banks do not have to disclose the loans they hold to their investors, and Federal regulators do not disclose this information either as it would potentially risk a run on certain banks, regulators are definitely taking an interest in energy related loans in bank portfolios. This may be the beginning of a change to the leading game as the banks begin to pull back from energy production. A broad pullback in lending could lead to significantly lower production levels from many U.S. firms which may help boost prices even marginally.

Some of the bigger banks have been proactive in dispelling investor concerns over the size of their loans. According to Citigroup third quarter data, it holds $22 billion in energy loans compared to a total loan portfolio of $632 billion. JP Morgan Chase says it holds $44 billion in energy loans in a total loan portfolio of $791 billion. Bank of America reports $22 billion in gas and oil loans in a total loan portfolio of $886 billion, and Wells Fargo says from a total portfolio of $888 billion, it has $17 billion in oil & gas loans.

The total amount of energy sector loans is $4 trillion, so these major banks hold only 3 percent of the total outstanding loans. U.S. banks currently hold only 45 percent of the total loans made to U.S. energy companies, with 30 percent held by foreign banks, and 25 percent held by non-bank entities.

Banks have not yet openly acted in cartel-like fashion but with the increasing financial chaos in the energy sector, they may change their tune like they did in 2009 when the housing industry was collapsing.

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