Looking ahead, oil observers expect the supply and demand dynamic to become more balanced in 2016. The Organization of Petroleum Exporting Countries also projected rising demand for oil this year and the next, which could “imply an improvement toward a more balanced market.”
Moreover, Barclays suggests that oil traders have been overly pessimistic, which has left the oil market undervalued over the mid-term.
“At current prices, shale is supremely challenged and demand could pose an upside surprise,” Barclays added. “Furthermore, the market may be overly optimistic about an Iranian return. 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.”
United States Oil Fund
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Max Chen contributed to this article.