US shale oil $50 – US shale, forex and a price war could push oil back down to $50: BofA Merrill Lynch

 US shale oil $50
Luke Graham |
Increased U.S. shale production, a stronger dollar and a price war are among the risks that could push down the price of oil, according to the Bank of America Merrill Lynch.

US shale oil $50

Martin Bureau | AFP | Getty
An oil platform off the coast of Angola

The investment bank lowered its price forecast for Brent crude from an average of $55-$75 per barrel through 2022 down to an average of $50-$70 in its latest global energy paper.

While oil prices have recently recovered thanks to increased consumption and about 90 percent of the OPEC oil-producing cartel sticking to agreed production cuts, the team at BofA Merrill Lynch Global Research warned that U.S. shale is set to rock the market once again.US shale oil $50

“Oil prices have recovered mostly thanks to OPEC and key non-OPEC players putting an end to a two-year price war and agreeing to cut production by 1.8 million barrels per day (mb/d). So OPEC spare capacity has expanded,” the researchers said in the latest global energy paper.US shale oil $50

“Moreover, U.S. shale production is now poised to recover on improved efficiencies following the rebound in longer-dated WTI prices above $50 per barrel.”

The research team predicted that oil demand would grow slowly for the next few years, expanding by 1.1 mb/d per year through to 2022, driven by emerging markets. However, carpooling initiatives, autonomous driving and electric vehicles in develop markets could drag on demand.US shale oil $50

Meanwhile, if oil prices rise above $55 a barrel, more U.S shale production will come online and take market share, the note predicted.US shale oil $50

“We believe U.S. shale oil producers will come out ahead and deliver outsized market share gains by 2022. Assuming a gradual recovery in oil prices into a long-term average of $50 to $70 a barrel, we project annual US shale oil growth of 700,000 b/d in 2017-22.”

However the research team did note some potential upside risks for oil: Faster-than-expected oil demand growth, geopolitical risks and building inflation would support oil prices.

Oil prices are trading lower today. Brent crude is down 34 cents to $56.32 a barrel, while WTI is down 34 cents to $53.99 per barrel.

Oil prices have been trading in a narrow band since for the last few months, swinging higher and lower by just a few percentage points. Since the beginning of the year, Brent is down 0.79 percent, while WTI is up 0.2 percent.