Oil prices are likely to be stuck within a range of $40 to $60 for the next year or more, according to the latest investment forecast from U.K.-based wealth manager Coutts.
In its mid-year investment outlook, published Wednesday, the private bank – which is reported to have the U.K. queen as one of its clients – said it expects oil prices to quieten down and stabilize for the medium term.
"After big ups and downs in the last 10 years, we expect the oil price to stabilize in the $40-60 range for the next year or two," the report said.
"This is partly due to the stabilizing effects of U.S. shale production, which becomes profitable with oil at about $50 per barrel. As a result we don't expect the oil price to move far from this level."
Coutts' explanation for this narrow range is that once oil prices raise towards the $60 per barrel, U.S. shale producers increase output and OPEC members are more tempted to raise production. This increase in supply soon causes the price to fall back. At the other end, oil falling towards or below $40 would cause shale producers to cut output. This, plus steady demand from emerging markets, would push prices back up.