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Oil and the banks: As prices fall, risks may rise

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Falling oil prices may be good news for consumers at the gas pumps, but they could be bad news for some bankers in the oil patch.

Oil prices fell another $2 a barrel Monday , extending a slide that began this fall. After peaking at more than $100 a barrel this year, U.S. crude is now changing hands for less than $65 a barrel-a five-year low.

Some oil market watchers say the price drop isn't over, thanks for a boom in U.S. production and a recent decision by market cartel OPEC not to cut production and tighten global supplies. Analysts at Morgan Stanley said that the resulting glut of oil could push prices as low as $43 a barrel next year. "Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley analyst Adam Longson said.Read More Venezuela is 'desperately looking for funds' Much of that supply is coming from a boom in U.S. crude from producers who are squeezing more oil out of the ground with improved technologies like hydraulic fracking and horizontal drilling. Though the new techniques have breathed new life into the U.S. oil patch, they're not cheap. And a lot of the equipment and manpower needed to produce that oil has been paid for with borrowed money. That's left some banks holdings those loans-and their investors-looking closely at the increased exposure on their books to suddenly oil lower revenues. A prolonged era of low oil prices could also hit the broader economies of states that rely heavily on the oil industry for jobs and consumer spending, according to analysts at BMO Capital Markets. "If oil prices fall below $65 for an extended period, it could lead to weaker energy loan demand and also have a negative impact on economies in energy-dominant states such as Texas and Oklahoma ," they wrote in a recent note to clients. BMO pointed out that in the short run, those banks have hedged against the possible impact of oil prices falling into the mid-$50s a barrel.

But for any bank investing in the oil boom, a lot depends on how low prices fall from here, and how long they stay there. If prices stay low for an extended period, banks would likely ask borrowers for more collateral, adding stress to producers already feeling the effects of lower revenues. That impact would vary greatly from one producer to the next. That's because some have borrowed more than others and their cost of production per barrel ranges widely.

Each oil field-from the Bakken in the Dakotas, to the Permian and Eagle Ford basins in Texas and the Anadarko Basin in Oklahoma-has a different hydrocarbon mix and different economics, according to analysts at Fitch Ratings.

Read More Why Iran needs a nuclear deal-badly With prices in the low $60s, some producers may already be operating below breakeven, according to Fitch analysts. If prices bounce back above $70 per barrel within the next quarter or two, the impact will be fairly small. "Oil prices below $50 a barrel, however, depending on how sustained, would likely trigger a jump in energy loan losses and could impact 2015's earnings for the energy-concentrated lenders," the Fitch analysts wrote.