Efficiency improvements from the world's largest oil-producing firms and countries, alongside the rise of U.S. shale, will see prices slide back to near $50 a barrel, according to research at investment bank J.P. Morgan.
Christian Malek, the head of EMEA oil and gas equity research at J.P. Morgan, said that the "breakeven" price — where they just about manage to cover their costs — for OPEC nations and major energy companies would drift back towards $50 a barrel by the end of next year. He explained this current price was in the mid-$60 a barrel price range, including for nations like Saudi Arabia, Iraq and Kuwait.
However, the bank predicted a "breakeven duel" between the 14-member OPEC organization and big oil companies would soon "drive a vicious cycle for oil prices, with medium-term pricing likely to gravitate to the low-$50s."
"Everything is gravitating towards $50 a barrel," he told CNBC Thursday.
He went onto say that while improved efficiency standards among big oil companies was one of the main deflationary breakeven price pressures, the most disruptive influence was likely to continue to be the relentless rise of U.S. shale growth.
Oil prices have surged more than 35 percent since the middle of last year, with Brent crude briefly rising above $70 a barrel before slipping back below the psychologically important level on Wednesday.
The main price driver has been a supply cut from major oil producing group OPEC and Russia, who started to withhold output in January last year. The production cuts by OPEC and 10 other allied producers, which are scheduled to last throughout 2018, are aimed at clearing a supply overhang and propping up prices.
