V-Shaped Recovery in Oil Prices Unlikely

Brent will average $52/bbl in 2015 and $58/bbl in 2016 according to Bank of America Merrill Lynch Global Commodity Research.

“In the past 15 years, the global economy was defined by rising commodity prices, zero interest rate policy, and a weak USD.

“This cycle has now gone into reverse with a decelerating industrial economy in China and the rise of US shale. As US employment picks up, Europe and Japan fight secular stagnation. The observable outcome is monetary policy divergence and a strong USD.

“Meanwhile commodity markets face surpluses after years of excess investment as EMs face a higher Fed funds rate cycle. This combination of a stronger USD, a slowing China, and falling commodity prices is not going away anytime soon. As the money runs dry and governance issues across EMs spring up, expect global oil demand to stay soft. We reiterate our view that Brent will average $52/bbl in 2015 and $58/bbl in 2016.”
Source: CommoditiesNow