Barclays warns of oil prices falling back to the low $30s per barrel as investors "rush for exits"

Jessica Morris
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Pennzenergy Company Oil Exploration Drilling Rig In The Gulf Of Mexico During Sunset (Ph
Barclays says recent commodity price gains do not correspond with market fundamentals (Source: Getty)

Barclays has warned oil prices could be heading back towards $30 per barrel, ending this year's rally which has sent the black stuff up around 50 per cent.

The investment bank has predicted a broad-based plunge in commodity prices, arguing that the recent gains fail to correspond with market fundamentals.

It said this could lead to a mass rush among investors out of the asset class, whittling prices down as much as 25 per cent.

"Investors have been attracted to commodities as one of the best performing assets so far in 2016," its analysts wrote in a note.

"However, in the absence of any concerted fundamental improvements, those returns are unlikely to be repeated in the second quarter, making commodities vulnerable to a wave of investor liquidation that we estimate could, in a worst case scenario, knock as much as 20 to 25 per cent from current price levels."

Such a move would end the recent rally this year, which has sent US West Texas Intermediate around 50 per cent higher since falling below $27 per barrel in January.

Barclay's warning comes amid rising concern that the recent commodity price rally could be about to peter out.

Most analysts are expecting the end of the year-and-a-half long slump, but also predict that there will be little upside in the near future.

The oversupply of oil has sent Brent crude from over $110 in June 2014 to just under $40 today.

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