The bank's oil analyst, James Zhang, said in a research note that oil prices should rally later this year as the temporary effect of the release of strategic oil stocks onto world markets by the International Energy Agency wanes.

"We keep our WTI (US light crude oil) price forecast unchanged for this year but increase our Brent price for the third quarter and fourth quarter by $8 per barrel," Zhang said.

This revision brings Standard Bank's average forecast for Brent in 2011 to $116 per barrel and takes the WTI or Brent spread to an average of $15 per barrel, he said. Zhang did not say what his previous forecast for Brent in 2011 had been.

"For 2012, we maintain our forecast for the WTI price at $110 per barrel, but increase our Brent price forecast by $5 to $120 per barrel," Zhang said.

Zhang said he believed Brent was still undervalued against WTI further forward, particularly in 2012 and 2013 and said he believed the recent dislocation of WTI and Brent prices was "here to stay".

Copyright Reuters, 2011