Barclays Optimistic About Brent Prices in Next Quarter

The oil market is expected to see a downward correction this quarter, but Brent prices will move higher in the final quarter of this year, according to a research note from Barclays.

"Prices have moved higher, due to a perfect combination of a favorable macro environment, a seasonal uptick in consumption, continued inventory drawdowns and geopolitical unrest," the note said, CNBC reported.

 "Certain factors that supported prices in July are unlikely to last and we expect a downward correction during this quarter."

The report, however, forecasts Brent prices going up to $54 a barrel in the last three months of the year, based on continued inventory draws, OPEC discipline and the ongoing decline in output in Venezuela.

The report added that during the recent market rally, prices moved higher because of a paring back of selling positions, rather than new buying trades entering the market.

"Fundamentals remain shaky this quarter, therefore any rally that occurs before more substantive inventory draws would be short-lived."

Oil markets traded lower in Friday's session, with US crude remaining below $50 per barrel, restrained by rising output from the US as well as producer club OPEC. Both Brent and WTI are down more than 9% since the start of the year and close to 20% over a 12-month period.

A number of analysts have predicted oil prices to go back up this year. RBC Capital Markets' Helima Croft told CNBC earlier this week that there is very high probability Venezuela's state oil company will default and bring about a steep jump in crude prices.

"I think that's going to be the biggest geopolitical story to watch in the oil markets," said Croft, RBC's global head of commodity strategy, on Tuesday's "Trading Nation." "The question is how fast does Venezuela fail?"

Croft expects this could be a catalyst pushing oil prices to $70-80 a barrel by fall. The Trump administration imposed sanctions on Venezuela, one of the world's top crude producers, last week as political turmoil continued to cause chaos and the country runs out of cash. According to Reuters, the US is still considering broader sanctions against Venezuela's oil industry, which could hit the country's economy that is heavily-dependent on oil.

The country's economy is almost completely at the mercy of the oil industry, as it contributes around 95% of the country's exports. However, falling investments in the industry have made it less profitable and productive.