The recent flattening of the Brent futures curve resembles price action experienced in 2008- 09 and hints that the market may be looking beyond the near-term oversupply and that price stabilization and possibly a recovery are on the way. However, Barclays say, this is a false-flag and the market is forecast to weaken again in the near future.

The recent recovery in crude prices is similar to that of 2008-09 and when comparing these two periods there are several similarities worth noting, Barclays said.

First, early in 2009, when the crude oil market stabilized and began to recover, it did so in the face of a weak near-term fundamental outlook, where stock builds were expected.

In 2015, the market is experiencing a similar pattern of price action and the outlook is also imbalanced, albeit to a much larger extent. Second, during the financial crisis, time-spreads blew out before crude stocks began to build and narrowed several months before stockbuilding ended.

Similarly, from mid-2014 through late-January 2015, time-spreads widened and then tightened again, but forecasts indicate that stock builds are still expected over the coming months.

Third, the narrowing of the time spreads in 1H 09 was accompanied by a recovery in flat-price and coordinated OPEC cuts. In recent weeks, the recovery in flat-price was also accompanied by tighter time spreads, according to Barclays.
Source: Barclays