Oil markets have been prone to over-bearishness of late with fears over supply returning to the market largely "overdone," according to the latest oil market analysis by RBC Capital Markets.
Oil prices are oscillating on hopes that a rebalancing is taking place in the markets and fears of a continuing global oversupply – and the potential for more oil to return to the market from the likes of Libya and Nigeria, producers which have seen supply disruptions.
Helima Croft, RBC's head of commodity strategy and commodity strategists Michael Tran and Christopher Louney said in a note on Wednesday that market caution was overdone, however.
"The oil market recently has found itself in a sort of bear trap. Even as we march closer to the point where the daily global supply overhang turns to a deficit, a deluge of bearish headlines has kept the market on its heels," Croft and her colleagues noted, adding that they "believe that the most significant bearish risks are overdone or have already been largely priced in."
Although oil prices would remain choppy in the near term, RBC said, it maintained its conviction that "oil prices will grind higher through the balance of this year and into next, barring a significant deterioration in the "macroverse."