Bank of America Corp. repeated its forecast that U.S. crude futures may temporarily collapse to $50 a barrel in the next 24 months because of surging oil production in North America.
The U.S. and Canada will increase output by 880,000 barrels a day this year, accounting for all of the supply growth outside the Organization of Petroleum Exporting Countries in 2013, the bank said in an e-mailed report. While West Texas Intermediate, trading at about $95 a barrel today, will average $90 this year, prices may plunge by almost 50% within two years because of the output boom, it said.
“While non-OPEC oil producers have struggled to mitigate steepening decline rates, crude oil production in the United States has completely bucked the global trend,” Francisco Blanch, the bank’s head of commodities research in New York, said in the report, dated yesterday.
Output from non-OPEC producers outside North America “has dropped at an alarming speed,” and will fall by 180,000 barrels a day this year as output rates decline at aging oil fields, particularly in the North Sea, according to Bank of America.
The difference in supply developments will help maintain an average $20 discount this year of WTI against Brent crude, which will average $110, the bank said.