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Tags: WTI | oil | 50 | barrel

BofA: US Oil Could Drop to $50 a Barrel

By    |   Wednesday, 12 December 2012 12:03 PM EST

West Texas Intermediate (WTI) crude oil could drop to $50 a barrel during the next two years, but the drop would give drivers little relief at the gas pump, Bank of America Merrill Lynch analysts predict, according to CNNMoney.

That's mainly because oil from American shale deposits — WTI crude — comprises a small portion of oil used to make gasoline, the analysts say, and prices of other types of oil, including Louisiana Light Sweet, Alaskan North Slope or Nigeria's Bonny Light, are still high.

WTI, they say, will probably drop temporarily sometime in the next two years due to surge in new oil production from American shale deposits, CNNMoney reports.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

"No one expected output to grow by a million barrels per day last year," said Merrill Lynch researcher Francisco Blanche, according to CNNMoney. "No one."

With production booming, oil is backed up in the U.S. oil distribution system, namely in Cushing, Okla., where many pipelines meet and storage tanks are located.

The government, the analysts predict, may need to approve exports of WTI to help oil production continue because the glut is becoming so large, CNNMoney reports.

The International Energy Agency's prediction that the United States will surpass Saudi Arabia in oil production within a decade may not come to pass, writes Devon Shire, an accountant and investor, for Seeking Alpha.

The American oil boom will drastically slow down due to a shortage of drilling rigs, predicts Shire, author of a value investing newsletter.

Natural gas drilling rigs that were switched to oil drilling helped prompt the oil boom, but there are only so many rigs to go around, he points out.

"As the rig count flattens (as it has to) the rate of growth in oil production is going to decrease rapidly. Production will keep growing, but at a much lower rate."

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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StreetTalk
West Texas Intermediate (WTI) crude oil could drop to $50 a barrel during the next two years, but the drop would give drivers little relief at the gas pump, Bank of America Merrill Lynch analysts predict, according to CNNMoney.
WTI,oil,50,barrel
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2012-03-12
Wednesday, 12 December 2012 12:03 PM
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