Quick overview

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BofA believes that the oil price floor is likely to form at $55 per barrel. The company is sticking to its Brent forecast of $61 per barrel in the fourth quarter of 2025 and $64 per barrel in the first half of 2026, according to that report.

However, the report cautioned that “if U. S. -As OPEC+ production ramps up and trade tensions with China intensify, Brent may fall below $50 per barrel. The report states that market participants have been “sick worried about a crude oil glut for almost a year now.”

It also notes that the prices of Brent and WTI crude oil have dropped by roughly half from their 2022 peaks of $128 and $124 per barrel, respectively. “Of course, OPEC+’s agreement to raise quotas within the Group of 8 by roughly four million barrels per day over 18 months beginning in April 2025 is largely responsible for this year’s lower oil prices,” the report stated.

“China’s rapid strategic oil stockpiling and the impending surplus in 1H26 have caused Brent to have an odd term structure: tight in the front, loose in the back,” it added. “However, oil prices have dropped sharply in recent days as China reinstated some restrictions on rare earth elements (REE), the United States threatened China with new tariffs, and Iran threw down the gauntlet by turning on transponders to show the world where its oil is going,” the report continued.

The current long-term contango of almost $4 per barrel and the short-term oil backwardation structure are anomalies that will fail, according to BofA’s report. According to the report, “we estimate that only 5% of months over the past 20 years have had a contangoed long-term curve with a backwardated near-term curve.”.

The long-term contango of almost $4 per barrel today is a notable anomaly in contrast to the levels of short-term backwardation that we are currently witnessing, the report continued. “One of,” BofA stated in the report.