Bank of America Merrill Lynch has revised their crude oil price forecast in its new report. Merrill Lynch revised up 2016 Brent forecasts to $62 from $58, but remain bearish relative to the forward due to the big oil overhang."We forecast 2015 Brent and WTI crude oil prices to average $58 and $53/bbl, respectively, and average $62 and $57 in 2016."

The bank also raised Brent end-of-period 2Q forecasts to $63/bbl, but lower 3Q to $54/bbl and leave 4Q unchanged at $61/bbl.

“With flat price lows now likely past us, we lift our end-of-period WTI target for 2Q15 from $41 to $59/bbl. Even then, we 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.”

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.

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: Bank of America Merrill Lynch