The global oil balance has turned out worse than expected in the first quarter, and BofA Merril Lynch's latest projections are pointing to 1.9 million b/d of oversupply in 2Q and 0.7 million b/d in 2H15.Thus inventories globally will continue to be pressured upward this year, keeping the upside to Brent prices capped, Merrill Lynch says in its latest report.

“For next year, we only expect a moderate draw in global inventories.”

Merrill Lynch recently revised up 2016 Brent forecasts from $58 to $62/bbl, but remain bearish relative to the forward strip, due to the big oil overhang, a weak outlook for EM demand, a return of US shale and a potential Iran deal.

“Also, we see WTI prices for 2016 capped on increased hedging activity in North America and maintain our 2016 WTI crude oil price forecast of $57,” the report says.

The staggering crude oil inventory build in the US has started to slow down, with Cushing even recording the first draw this season, as demand from refiners has picked up seasonally in response to strong margins. This factor, combined with expectations of tighter global oil balances down the road, has led to a rally in global crude oil prices since mid-March.
Source: BofA Merril Lynch