Oil: The worst price action is behind us, Brent to remain around $30/bbl – Rabobank

Analysts at Rabobank expect spot Brent prices to be anchored at $30 a barrel until the glut of crude oil storage anchored offshore is worked off in the weeks and months ahead. 

Key Quotes: 

“We expect to see spot Brent prices stabilize around the $30/bbl level until inventories begin to normalize. In our view, the worst price action is behind us now but the recovery will likely take some time to develop. Prices will struggle to run too far in the short-term as that will just attract barrels out of storage which will pressure spot prices back lower in a vicious cycle. This dynamic will remain in place until global demand recovers back toward pre-virus levels which could take months at this stage.”

“We expect the back of the curve to lead oil prices higher in the second half of this year as supply and demand eventually find balance. As a result, we still favor buying deferred crude oil contracts to play the longer term bullish fundamental story that is forming while simultaneously holding a short calendar spread position at the front end of the curve given the enormous amount of inventories that will need to be financed in the meantime.”