Oil Volatility Leading Up to OPEC Meeting, Market Rebalance Afterward: Mirabaud

Vaqar Zuberi says supply reduction is necessary to have a "meaningful impact" on prices.

While he predicts oil price volatility leading up to the Doha meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) and non-member producers, Vaqar Zuberi, portfolio manager & senior analyst with Mirabaud Asset Management, believes the supply-demand gap will begin to close in the second half of this year.

In this regard, Zuberi joins the growing list of analysts who suspect the worst may be over for oil and that a market balance – which critics say the OPEC/non-member meeting to discuss a price freeze will not be able to achieve – is in the offing.

Of the weeks leading up to the April 17 summit (which Iran and Libya have pledged not to attend because they are intent on restoring their own output), Zuberi was quoted by Gulf news as saying, "We think for time being oil prices would remain volatile, subject to the release of data."

He added: "We believe in the interest of all parties to stabilize the prices of oil and we believe that comments alone won't have a meaningful impact on prices till we see a clear trend of supply coming down."

Zuberi is far more optimistic about the second half of this year: "We believe that the supply demand gap will reverse in the second half of 2016 and early 2017.

"The demand from U.S. is well bid, amid demand from the emerging markets; there is supply destruction going on as large number of producers have become unprofitable."

Meanwhile, analysts at Commerzbank added to the voluminous criticism of the proposed OPEC/non-member output freeze by stating in a new report, "The meeting is turning more and more into a farce.

"It is hardly surprising that Libya is not interested in the Doha meeting: like Iran, it first wants to increase output and then talk about a freeze."

Indeed, Bijan Namdar Zanganeh, oil minister for the Islamic Republic, complained to the press last month that "It is very ridiculous, they come up with the proposal on freezing oil production and call for this freeze to take place in their 10 million barrels a day production vis-a-vis Iran's 1 million barrels a day" planned production boost.