TORONTO, ON – Scotiabank VP and commodity analyst Patricia Mohr expects a dramatic rebound in oil prices next year.

In a recent Scotiabank Commodity Price Index report, she predicted, “Oil prices will snap back by mid-2015.”

Mohr said the grade of crude oil used as a benchmark in oil pricing (known as WTI, for West Texas Intermediate) is oversold at US$56 a barrel and a correction is coming that will boost its value as high as 25%.

WTI grade crude oil is trading today at US$55.56.

She said trading levels below US$60 look unsustainable for WTI, also known as Texas light sweet.

“The decision by Saudi Arabia not to reduce output to shore up international oil prices, but instead to allow prices to drop to levels curbing U.S. shale development appears to be having a negative impact on confidence in a wide variety of other commodity as well as equity markets,” she pointed out.

Anything below US$60 a barrel misses the average mid-cycle breakeven costs in oil activity across the United States and Canada.

“A sharp, fairly rapid reduction in drilling activity is already underway, which will help to bring supply back into balance with demand,” she said. “While an extended period of lower oil prices (sub-US$80) is expected over the next several years, the year-over-year rebound in WTI prices by late 2015 will likely be double-digit.”