Forecast predicts big drop in U.S. oil price

12 13, 2012 by Fuel Fix

The price of U.S. crude is heading for a precipitous decline that could force the nation’s production surge to slow, according to a BofA Merrill Lynch forecast.

The benchmark price for domestic oil could drop to $50 a barrel in the next two years, the lowest level since 2009, analysts wrote in the annual market outlook. Currently, the price for West Texas Intermediate crude is hovering around $85 as oil extraction rises in the country.

“While the rest of the world will continue to fight for scarce molecules of oil and gas, North America’s energy supplies are surging,” the BofA report stated. “We see a risk of WTI crude oil prices temporarily dropping to $50/bbl over the next 24 months to force a slowdown in output.”

Meanwhile, Brent crude, the global benchmark oil, will hit an average $110 per barrel in 2013, the researchers projected. It’s trading so far this week around $108.

The international energy market will remain tight because of production declines in the North Sea and lackluster results elsewhere.

In addition, the report noted, uncertainty around Iran’s oil production could be the largest contributor to volatility in the Brent price.