Oil prices have tanked in recent days as traders scrambled to find places to store oil, but UBS expects the reverse situation to happen in the fourth quarter of the year.
The Swiss bank expects Brent prices to climb back to $43 a barrel in the second half of the year once economies are expected to be back in running and have exited lockdowns.
Chief Investment Officer at UBS Global Wealth Management, Mark Haefele, said while the oil market is heavily oversupplied this quarter, the bank expects it to move towards balance next quarter and become under-supplied in fourth quarter of this year as lockdown restrictions are eased and oil demand picks up.
“We forecast Brent to recover to $43 a barrel by year-end,” Haefele said.
An increase to $43 per barrel for Brent would represent a gain of around 115 per cent from its currently price, with the international benchmark trading at around $20 per barrel last Tuesday. The price however rose marginally to $26.30 at the weekend.
Oil prices have been volatile in recent days as traders are fearing that the world is running.
May contract expired, meaning traders had to pay people to take the oil off their hands as storage facilities were limited, particularly at a key storage facility in Cushing, Oklahoma.
Coronavirus has battered demand for fuel, with every major economy into lockdown, and economic activity remains subdued.
Some US states, including Oklahoma, started reopening their economies last week, and several others have started lifting stay-at-home orders, likely boosting economic activity and oil consumption in the coming weeks.
Chief Market Analyst at Avatrade, Naeem Aslam, said: “Overall, I do contemplate that fundamentals are improving to a small extent because the US shale oil rig count has dropped vividly over the last week, and it is bound to have a positive influence on supply.
“As for the demand side, I reason we have hit the bottom. This is because, with the easing global lockdown measures, it is only a matter of time when we will start witnessing the demand equation showing more signs of life
