Analyst: Risk in oil continues despite rally

Downside risk to oil prices in Q2 : Pro

There is downside risk to oil prices in the second quarter as the U.S. nears a deal with Iran and Saudi Arabia increases productions levels, Barclays' Michael Cohen said on Monday.

"If the perception of the market is we'll get another two to three hundred thousand barrels a day from Iran, then that will weigh on the overall market balance," he told CNBC's "Squawk on the Street."

The second quarter is generally seen as the weakest time of year for oil market balance. Despite last week's rally in oil prices and forecasts for less U.S. production later this year, Cohen still sees a downside for the second-quarter numbers.

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A file photo shows an Iranian worker at the South Pars field in the southern Iranian port town of Asaluyeh.
Atta Kenare | AFP | Getty Images

"Right now OPEC's strategy is working: They're retaining and regaining that market share they lost over the course of 2014 when non-OPEC suppliers raised their output when prices were extremely high," he said.

About last week's oil rally, Cohen did say that "the strength we have seen so far is something that we have to acknowledge when we put together our price forecast for the next couple months."

Oil prices rose in a volatile day of trading on Monday as concerns over tension in the Middle East and a drop in the number of U.S. rigs drilling for crude offset comments from Saudi Arabia's oil minister that Saudi production would stay near record levels in April.

Saudi Arabia has put security forces on alert for a possible militant attack on a shopping mall or energy installation, Interior Ministry spokesman Mansour Turki said on Monday.

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Since the beginning of April, oil prices have risen around 17 percent, pushed up by reports of a possible dip in U.S. output.