From a 12-year low of barrels priced below $27, oil prices have recovered and have shown positive signs over the past few months that are expected now to aid Marathon oil.

After Bank of America Merrill Lynch opted for a recovery in the crude oil market with the Marathon Oil Corporation being upgraded to a Buy from being Neutral, the MRO price objective surged from $20 to $21 showing a 43% upside potential compared to its current levels.


The bank also predicted a gain of 50% in the price of crude oil by next year at some time around June.


Investments and productions have recently been lowered as a response to the two-year continuous decline in the prices of crude oil. Oil and gas companies since then have deducted their capital spending to almost $300 billion after June 2014 while there was a 37% tumble in the international rig count.

The crude market, over the past few months, has shown signs of recovery after a price below $27 per barrel from a twelve-year low. US’ Crude Benchmark West Texas Intermediate (WTI) is trading at $ 46.29 each barrel in markets from Asia while Brent, the Global crude benchmark is trading each barrel at $48.85.

Increasing price of oil by 2017

While oil demand is currently at a strong increase in their rates, BofAML is believed by analysts that the declining supply and demand for crude would affect the market in the near future. But after the market transition to post recovery has in the months to come, the forecast by Analyst Savita Subramanian are for the WTI to increase to $54 each barrel before the year and ands and an increase of $69 each barrel by June next year. WTI traded at $46 per barrel on Wednesday.


Also according to Subramanian, the underperformance of Energy dates back in 2009 during the bull market with a weight of below 7% in the S&P 500. In the following three years, there was also no recorded a low S&P 500 weight like the 7%.

With the incoming growth expected in the energy production sector next year, Bank of America Merrill Lynch stated that the purchase of Marathon Oil should be purchased as early as now. This has upgraded the company’s shares from neutral to buy.

Overall, the increase is expected to bring the oil market and even energy companies to recovery after a decline for the past two years. BofAML has stated that every increase of 25% in the prices of oil will lead the energy sector to surpass the international market by 90%.

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