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BofA ML Commodities Research. IEA estimates Saudi production capacity at 12.2mn bpd

the risk premium in the oil market will rise as the market

as Saudi ramps up production over the medium-term by

which is one of the lowest levels ever. Even if Saudi Arabia did start investing

while the scale of any Iraqi long-term output increase remains the

and we believe it intends to at least increase its

OPEC needs to increase production by 4.1mn bpd in

so OPEC has to come to the rescue to provide the required incremental supplies.

we believe US shale production will grow again

as shale is very price sensitive within a 12-month

the effect on non-OPEC non-shale production is unlikely to be

in response to the low price environment. Should capex start to

depending on how much incremental production OPEC can

we see global light sweet crude oil averaging US$55 to US$75/bbl

while we see supply falling across non-cartelized

and see oil prices of US$55-75/bbl over 2016-2020.

which would suggest a 10-year Saudi bond yield of c3.65%.

relative credit metrics and likely larger planned

timely and credible medium-term fiscal policy to

in our view. Saudi Arabia would however likely be