Window for an oil correction is closing

The chances of another sharp fall in the price of oil is rapidly receding, according to a notable European commodity analyst, who expects a period of stability in the second half of the year.

“The simple fact of the matter is that the window for a correction will be closing in the coming few weeks,” Michael Wittner, global head of oil research at Societe Generale, said in a note released Monday morning.

He highlighted a number of reasons why prices could stabilize over the next six months, including the fact that it comes after the March-to-May quarter, which is traditionally when global crude oil supplies are built up.

Crude stockpiles – which indicate a glut in supply – would also be reduced, Wittner highlighted, as the winding down of refinery maintenance in Europe and Asia means more oil will get processed.

U.S. refineries are also expected to step up a gear and further reduce stockpiles, and Wittner said he expects months of declining U.S. crude production to further buoy prices.

For Brent, Societe Generale sees an average price of $60 a barrel in the third quarter of 2014 and then a rise to $65 a barrel in the fourth quarter. The French bank predicts that WTI will track that price, trading at $55 a barrel before rising to $59 a barrel in the last quarter of 2014.

But the bank’s analysts forecast a dip in the price of oil in 2016, as a pickup in U.S. shale spending, drilling, and well completions weigh on prices.

Brent crude futures traded flat Monday at around $65.40 a barrel, and U.S. WTI crude was also flat for the session at $59.37. This comes after strong gains last week for the commodity.


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Former Craig

Former Craig

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.