OPEC crude production freeze talks well-timed: Barclays

Fundamentals in the crude oil market have been weak for a while and suggest demand has softened from the start of the year says Miswin Mahesh, Energy Analyst at Barclays.

In an interview to CNBC-TV18 Mahesh says, “Organization of the Petroleum Exporting Countries (OPEC) production freeze talks is timed very well.”

Crude supply is adjusting and he expects Brent crude prices at roughly USD 50 per barrel in the near term.

China’s demand for energy has softened compared to India, he says, adding, there is need to keep an eye on developments in Iraq and Nigeria right now.Below is the verbatim transcript of Miswin Mahesh’s interview to Manisha Gupta on CNBC-TV18.Q: What is your sense really because the kind of volatile moves that we have seen in for the crude oil prices?A: Is has to do with a few things, we have had a weak fundamental picture for a while. It is refined products especially weighing on the crude oil markets and on top of that we have got the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC production fees talks also been brought back into the agenda and that helped to reverse sentiment. I would say it is these cross currents from weak fundamental picture and other forces such as these, ad hoc forces that are trying to divert momentum essentially. So, we are in that sort of criss-cross at the moment and that is why we are seeing the volatility. Q: What is your sense, the kind of rally that we saw come in the previous week from a bear market to a bull market in 11 short days do you see it over blown do you think too many people went long too much too soon?A: On the downside just as, as much as we saw the rally earlier this year we saw positioning being built fairly strongly to an extent where it was getting stretched. That is always a sign that whenever we see reversals they came to be very strong as well and that is part of the reason why it is almost textbook reversal that we have seen with the positioning sort of cleaning up after, sort of getting a catalyst from the OPEC and non OPEC production –stock once again. They have timed it really well and market isn’t really paying attention to that finer detail whether this production fee talk would be possible or not so it is a very safe flux at the moment.