BofA Merrill Lynch forecast Brent Crude Oil at the end of 2Q at $63/bbl, and a dip to $54/bbl at the end of 3Q, with a rebound to $61/bbl at the end of 4Q15. With flat price lows now likely past the markets, BofA Merrill Lynch has forecast end-of-period 2Q15 WTI at $59/bbl. Even then, the banking firm still believe WTI prices could double dip to $50/bbl as refinery maintenance kicks in in late September before recovering to $57/bbl by year-end.

“We forecast 2015 Brent and WTI crude oil prices to average $58 and $53/bbl, respectively, and average $62 and $57 in 2016,” Merrill Lynch says in its latest forecast.

With oil now having to “balance itself”, OPEC has given up on its traditional role of keeping supply and demand in check. The cartel is now effectively dissolved. The consequences of this shift in OPEC policy are profound and long-lasting.

Since crude oil is a very cyclical commodity and demand and supply are inelastic in the short run, OPEC’s formalized policy shift will mean much more volatile oil prices going forward, with a range of possibly $80/bbl, according to the report.

Iran’s crude exports could rise by 0.7m to 2.0m b/d by mid-2016 if sanctions are lifted, potentially taking market share from US shale in 2016. Downside pressure on forward oil prices could range from $5 to $10/bbl.
Source: BofA Merrill Lynch