Merrill Lynch research team have said today that oil prices will struggle in the near term.
"Against our expectations, the spike in oil prices from $80/bbl to $87/bbl came along with a rapid deterioration in the term structure of the WTI market. A surge in demand for storage as spot oil prices rally is an unusual event, and suggests that further oil price appreciation is unlikely in the short run," says an analyst note.
Rising on-shore stocks around Cushing, more floating storage in the Middle East, additional non-OPEC crude oil and a partial shutdown of European air space will likely limit further oil price advances near term.
As a result Bank of America Corp maintain that their 2Q 2010 average Brent and WTI crude oil price forecast remains at $83/bbl. Looking further out however analysts remain structurally bullish. As a result an average of $92/bbl WTI crude oil is forecast in 2H 2010. The analyst note goes on to say: "The spike to $87/bbl has likely set Saudi into action Our analysis suggests that higher crude oil prices tend to lead to higher OPEC crude oil production.
"In fact, OPEC’s compliance rate with their self-imposed cuts continues to decline and now stands at just 53%, down from a peak of 83% in March last year."