Oil Market Will ‘Flip To Being Undersupplied’ in Coming Months

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The imbalance between oil supply and demand is likely to reverse going into the summer, says one analyst, reports Yahoo.

Over supply

“Currently, the global oil market is probably slightly oversupplied. It’s going to flip to being undersupplied sometime in the late second quarter or early third quarter,” Tortoise portfolio manager Rob Thummel told Yahoo Finance Live.

“When the oil market is undersupplied, typically you see a positive price response. So we would expect oil prices to rise a bit,” said Thummel.

Crude prices have been under pressure recently, despite a production cut announced by OPEC+ last month. West Texas Intermediate (CL=F) and Brent (BZ=F) initially surged on the news but have since lost those gains.

WTI closed at $70.04 per barrel on Friday. Brent futures settled at $74.17.

Oil analysts anticipate a rise in demand as China’s economy reopens following strict Covid lockdowns last year.

“The whole world is waiting on when does the Chinese economy reopen. And it’s gradually reopening,” said Thummel. “We expect the demand for oil globally in China to grow and accelerate throughout the rest of this year.”

Thummel expects gas and oil related stock prices to rise in tandem with crude. Year-to-date, they the S&P Energy Select Sector (XLE) is down 10%, underperforming the broader markets.

“We think at Tortoise it’s an attractive time to be looking at the energy sector because prices are probably low. They’re probably going higher. And that will just result in an uplift of all energy stocks,” said Thummel.

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Source: Yahoo