Julius Baer | The narrative is changing on the oil market. The fears about an overflowing oil market and exhausted storage begin to calm. As the mood brightens, oil prices continued to rally so far this week, with Brent prices climbing back above USD 30 per barrel. The past days’ price action is all about sentiment, expectations that the latest data indeed shows a swifter-than-anticipated demand rebound, and investors chasing the market bottom. These sentiment cycles tend to be short-lived, lasting for weeks rather than months. The latest futures market positions still show rather downbeat levels, suggesting that a brightening mood likely offers further support to oil prices in the very near term. The fundamental outlook indeed is partially improving. Oil producers curtail output and judging by traffic indicators, oil demand rebounds swifter than expected as the lockdown measures are being eased. That said, oil storage is set to continue swelling until the rebalancing likely starts in summer. This peaking and ebbing of the supply glut seems a prerequisite for a more lasting oil price recovery, pushing prices towards and beyond USD 40 per barrel around the turn of the year. In the meantime, the oil shock remains a stress test that keeps uncertainty high, but the fear factor likely was as big as it can get late April. We stick to our Constructive view and long position in nearby futures contacts.