Brent and WTI prices will hover around $37/barrel this year, though the prices could move slightly higher in the second half of the year with WTI at a premium to Brent, says a commodities research published by Barclays.

The oil market is imacted by the inertia of non-Opec supply, especially shale, that has surpassed expectations for an adjustment. Iran’s return is also likely to come sooner, it said.

Non-Opec supply ex-US is lower, though the adjustments are not nearly steep enough to rebalance given the worsening demand outlook and higher Opec supply, said the report entitled “The Blue Drum”.

“Stocks have been building for eight quarters already and will likely build for four more, leading to our sub-$40 view for 2016,” said Barclays in the report.

“This lower price level will put all producers under even more pressure. Yet, our medium-term thesis for $75-85 by 2020 still holds, and we expect prices to move slightly higher in the second half of 2016, with WTI at a premium to Brent. Looking at the balance of risks and their likely timing for the year ahead, we suggest that investors sell rallies in the first quarter of 2016.”

Geopolitical risks and delays in Iran’s return, combined with current market positioning, might lead to a rapid rebound in prices in the coming months that would be fundamentally supported, the report noted. – TradeArabia News Service