Bank of America sees $50 oil as Opec dies

The Opec oil cartel no longer exists in any meaningful sense and crude prices will slump to $50 a barrel over coming months as market forces shake out the weakest producers, Bank of America has warned.

Revolutionary changes sweeping the world’s energy industry will drive down the price of liquefied natural gas (LNG), creating a “multi-year” glut and a mucher cheaper source of gas for Europe.
Francisco Blanch, the bank’s commodity chief, said Opec is “effectively dissolved” after it failed to stabilize prices at its last meeting. “The consequences are profound and long-lasting,“ he said.

The free market will now set the global cost of oil, leading to a new era of wild price swings and disorderly trading that benefits only the Mid-East petro-states with deepest pockets such as Saudi Arabia. If so, the weaker peripheral members such as Venizuela and Nigeria are being thrown to the wolves.

The bank said in its year-end report that at least 15pc of US shale producers are losing money at current prices, and more than half will be under water if US crude falls below $55. The high-cost producers in the Permian basin will be the first to “feel the pain” and may soon have to cut back on production.

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  • David Murrell

    I have invested in oil-producing companies — off and on — and currently I am losing money on Crescent Point. But one things, over the years, investors have told me is, that when investing in oil, one does it convinced that “Arab-Muslim countries typically mess up everything”. So this is the one thing to look out for — that Arab-Muslim terrorists will strike somewhere, driving up the price of oil,

    One correction to the above: Iran is non-Arab, and they also could do something nasty. So could Herr Vladimir Putin. Oil prices goes up during world crises, and with the stupid doofus Obama in the White House, anything could happen that is bad for the West, good for oil. I will be holding on to my Crescent Point stock.

    • All true, it will remain a volatile market with Europe the most susceptible to shortage.

    • Exile1981

      I’m sorry your invested in crescent point.

  • Norman_In_New_York

    A free market is always better than a cartel no matter how much the globalists bitch and moan. Should the shakeout reduce supplies, the price will rise until there is equilibrium between supply and demand. Meanwhile, the inability of Iran, Venezuela and Russia to pay their bills is good for us, and if these lower prices generate advances in technology that make extraction and refining more economical, so much the better.

  • Raymond Hietapakka

    The Canadian Oil and Gas Industry is at least 10x the size, $-wise, compared with the rest of the entire Canadian Mining Industry.

  • Let’s hear it for free enterprise. Greedy oil men, driven by profits, have broken the back of the Middle East oil producers and proven the near term “peak oil” crowd fools.

  • Hard Little Machine

    OPEC’s never really been a cartel. Cartels have an enforcement mechanism. And the problem with thieves and pirates is that they ALL lie. All of them. So OPEC countries have never been able to clamp down on production when they agree to. They ALL cheat. So whatever the Arabs and South Americans and West African warlords in their $2,000 suits ‘agree’ to, they all go home and keep pumping as much as they can get away with from day one. The ONLY country that’s ever shown any tendency to dial production back is Saudi Arabia and that’s always for political reasons not economic reasons. So all OPEC members are always in a race to pump as much as they can on the sly before someone else complains, who’s doing the same thing. What happens long run is that the very high cost producers like Venezuela and Russia have to keep pumping at a loss just to keep the system operating because if they stop they won’t be able to restart production later. But this is how third world economies typically operate anyway. They neglect infrastructure until it collapses then they foment riots in the streets until they can stuff all their cash onto to the family 767 and fly away to Southern France.

  • James Hamilton

    If the current low oil prices are ‘BAD’ for the state & the economy & the public, as we are being let to believe by the media & the govt., then how the economy, the market & the govt. was doing & running well just a few years ago when the oil was selling at $60 or even lower??

  • Exile1981

    $50 or $60 oil will not hurt production as much as it will hurt capital projects.

    • Bataviawillem

      No shit, look at Russel metals and the Black diamond group, both depend on future developments and they are tanking.