Oil: Tight balance persists as Iran deal talk grows – TD Securities
TD Securities’ commodity strategists Ryan McKay and Bart Melek note that heavy deal-related headlines around Iran and Oman are influencing energy markets, but they argue Crude Oil fundamentals remain tight. They highlight growing ship-to-ship transfers via the Omani route, still-subdued regional flows versus pre-war levels, and the risk that increased leakage could both ease prices and provoke Iranian aggression.
Iran-Oman route and tight balances
"Crude can withstand this latest news barrage. Talks between Iran-Oman on a Hormuz route suggest Iranian control and a move away from the US backed Southern corridor, while the increased chatter of a return to the MoU also suggests Iranian control and a want for US concessions upfront, such as unfreezing funds, after failing to follow through last time."
"All of this is not fundamentally bearish for crude oil markets, particularly as it is unlikely a deal would increase flows compared to what is already leaking out."
"In this sense, the large number of ongoing ship-to-ship transfers in the Gulf of Oman is the first real sign suggesting flows via the Omani route could be growing closer to 7-8m b/d compared to the previous 5-6m b/ d range."
"However, when taken together with Fujairah flows and the declining Yanbu flows, the total regional flow is still only at 50% of pre-war volumes, which has been the post-MoU norm."
"The fundamental balance remains extremely tight at these current levels, and any increased flow met with China demand results in little change to the supply-demand balance."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
