In recent days, oil prices have undergone something like a perfect storm with the Greek crisis, Iran nuclear deal, strong dollar as well as Saudi production - all weighing on this commodity. However, several banks are not in a hurry to change their upbeat outlook. Let us have a look.
U.S. August crude, set to expire
later today, was down about 0.4 percent at $49.94 a barrel, back
under the $50 threshold after it tumbled below it for the first time
since April on Monday.
Brent crude slipped 0.2 percent to $56.52, says Reuters.
But this has not prevented some investment banks from switching their bullish tone on the outlook for the rest of the year.
For instance, JP Morgan expects Brent prices to reach $65 a barrel in the third quarter, and $67 dollars in the last quarter of 2015.
"We view July and August as the most likely time within 3Q 2015 when crude markets should be at their tightest, given peak summer demand for gasoline and the fact that refinery crude runs are forecast to peak in August."
Analysts at Barclays expect Brent to trade around $61 a barrel in the
third quarter and $66 in the fourth quarter of the year, however, they signaled there are threats to the forecasts.
"Product stock building could lead to weak refinery margins over H2 2015, in our view, especially since rising macroeconomic risks, particularly out of China, could limit upside surprises in global oil demand growth," the analysts wrote on Monday.
"If these bearish risks are realized, they are more likely to cause prices to remain near current levels than push prices lower for a sustained period of time."
Although Saudi Arabia's crude oil exports dropped to their lowest level since December in May, data showed Monday, some analysts admit that the overall dynamic is negative for oil.
In an interview with CNBC, Neil Atkinson, head of analysis at
Lloyd's List Intelligence commented:
"I am baffled how anybody can see significant market strength much before the winter."
"There was a surplus of supply over demand even before the Iranian deal, so on that basis how can prices rise by a significant amount unless there is a political explosion of some kind?"
2016 more balanced?
Despite disagreements over the short-term perspectives, analysts generally agree that 2016 will see a more balanced supply-demand dynamic.
Indeed, last week OPEC increased its demand forecasts for 2015 and next which would "imply an improvement towards a more balanced market."
From a fundamental perspective, 2016 looked undervalued, Barclays analysts added.
Shale is supremely challenged at current prices,
and demand could pose an upside surprise. Moreover, the market may be
overly optimistic about a return of Iran, they noted.
It will take some time for Iran to come back online as it has to invest in its oil fields as well as sign commercial contracts, most experts agree.
"The market is in the process of rebalancing and lower spot and forward prices are likely to expedite this, leading to higher prices in 2016/17 than the market is currently pricing in," the Barclays analysts said.
