After over six months of relentless selling, crude prices began rising to their highest levels for 2015 on short-covering with Brent climbing above US$62 a barrel and WTI topping US$53 over the past week.

But analysts at Wall Street banks and research groups have been quick to douse any flicker of hope that a sustained price recovery is in place. Citigroup presented a dire outlook with WTI plunging to US$20 a barrel before any recovery can take place while Goldman Sachs said US oil companies will have to further reduce operating rigs and slash production to help curb the global glut.

Last month, the International Energy Agency gave suppliers some hope when it said oil prices might begin recovering in the second half of 2015.

But its latest monthly report for February added a dampener that Organization for Economic Cooperation and Development (OECD) countries are building up stockpiles that it expects to reach a new high of 2.83 billion barrels by mid-2015.

“Despite expectations of tightening balances by end-2015, downward market pressures may not have run their course just yet,” said the Paris-based organisation.

US-based ESAI Energy said it expects the imbalance caused by the supply glut to to be eliminated only by 2018.

Global demand grew by just 900,000 b/d last year after averaging an annual 1.7 million b/d between 2000 and 2013, it said.

Taking into account the drop in global oil prices, changes to subsidies and taxes, and the strong US dollar, ESAI Energy projects oil demand growth to recover to about 1.2 million b/d in 2015-2016, then slow down again for the rest of the decade.

“Higher oil demand from lower oil prices is inevitable, but for some countries and products the results will be very mixed,” said Sarah Emerson, the company’s principal consultant. Global supply growth will begin to decelerate in the face of weak prices, with non-OPEC output rising by 1.2 million b/d in 2015, 900,000 b/d in 2016-2017 and by a smaller amount for the rest of the decade.

If OPEC holds production at close to 30 million b/d over the next three years, ESAI said the global oil glut will dissipate.

While crude oil prices will remain under pressure, the market will remain subjected to potential supply disruption from geopolitical threats. But a price recovery is still not on the cards given the enormous glut expected to be in place over the next few years.