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Shale Lenders in Retreat After Decade That Fueled Oil Boom

U.S. banks have already cut credit lines for oil and gas producers, and the squeeze is likely to continue in the next round of loan reviews

Tanks containing drilling fluid sit in a row near a rig drilling in the Permian Basin near Midland, Texas.

Tanks containing drilling fluid sit in a row near a rig drilling in the Permian Basin near Midland, Texas.

Photographer: Daniel Acker/Bloomberg

One of the key sources of funding for American shale is evaporating, just as the the sector needs it more than ever.

Banks lending against the oil and natural gas reserves of hundreds of independent U.S. drilling companies have pulled back from the sector at an unprecedented rate this year after energy prices slumped. There’s every indication they’re not done: Many in the industry expect further reductions to credit facilities in the fall, with higher costs and more stringent protections for lenders.