Brent crude oil futures will hit $70 per barrel in June 2017, BofA says

Crude oil prices were set for a large move higher in 2017 as demand from emerging market economies makes up for a slowdown from OECD nations, analysts at Bank of America-Merrill Lynch said.

Demand from the OECD group of industrialised nations was set to shrink by 120,000 barrels per day in 2017, but that would be offset by a 1.3m b/d increase from emerging economies - slightly above the 20-year average.

On net, that would result in global oil demand growth of 1.2m b/d next year. That was down from 1.4m b/d in 2016 but would suffice to send the market into a multi-quarter shortfall starting from the last quarter of 2016.

That would send Brent prices higher to an average of $61 per barrel in 2017, hitting a peak price of $70 per barrel at the end of June of the same year.

Fuel efficiency gains in the US and Europe already loomed on the horizon and the ongoing return of nuclear plants in Japan should bring down oil demand, the broker said.

Lower funding costs in local currency and in external debt were likely to feed into quicker credit creation and economic activity in the emerging world, the investment bank said.

"In fact, the negative interest rate environment in Europe and Japan, coupled with a dovish Fed, could even translate into a secular growth story for EM oil demand," analysts Francisco Blanch, Peter Helles, Max Denery and Michael Widmer said.

They referenced how car sales in emerging markets such as India and China were continuing to grow to back up their assertion, with the two EM giants posting rates of car sales growth of 12% and 10% each, respectively.

"In other words, our global oil demand projections could prove to be conservative given the low prices and wide availability of fuel [...] Sceptics should keep in mind that the last time the market experienced an 800 thousand b/d or larger deficit was 2011. During that year, Brent prices increased by $31/bbl or 38% on average compared to the year prior."