Macquarie Sees Oil Glut Risk on US-Iran Deal Before Midterms

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Or sign-in if you have an account.(Bloomberg) — Oil markets could tilt back into oversupply before the end of the year as Washington faces mounting pressure to end the Iran conflict with fewer than 100 days until the midterm elections, analysts from Macquarie Ltd said. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountA de-escalation is “weeks away, not months,” Macquarie’s energy strategist Vikas Dwivedi said in a interview on Friday. “They’re long a put option, but that value is decaying with time and the expiration date is the midterms.”While a comprehensive peace deal is unlikely in the short-term, tensions are expected to ease, allowing oil flows from the Middle East to resume, Dwivedi said. As soon as a deal is reached, the market will be “significantly” oversupplied, he added. Before the conflict broke out in late February, the oil market was bracing for a glut, but the war sapped millions of barrels of supply. Macquarie sees stocks are set to start building again, reaching a daily surplus of 2 million barrels in the fourth quarter, and doubling that in the first three months of next year.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againUS President Donald Trump’s incentive to reach an agreement to end a war that’s wildly unpopular comes as his Republican party hopes to retain control of Congress during the November midterm elections. The price of gas, which is again above $4 a gallon nationally, and wider inflation, are top voter concerns.Iran, for its part, risks facing a more aggressive US military campaign after the midterm elections. The country won concessions from the US during a now-defunct ceasefire and its economy remains stressed by the war.Oil markets have been gripped by multiple geopolitical flashpoints disrupting global flows. The US-Iran war drags on, and the Strait of Hormuz remains essentially shut, while Iran-backed Houthi rebels have launched attacks against Saudi oil tankers transiting the Red Sea. On Monday, oil prices fell as the US hit pause on attacks, with Trump saying it was in order to give diplomacy another chance. But it’s unclear if any substantial negotiations between the US and Iran were taking place. A potential de-escalation of the conflict ahead of the elections would likely involve concessions from both sides, including the imposition of tolls in the Strait of Hormuz, an outcome seen as “inevitable”, Dwivedi said. “It’s as clear as day, we don’t have a way to stop Iran for blocking the strait,” he said. Iran, on the other hand, may continue to be denied access to billions of dollars in frozen funds. (Updates with Macquarie’s forecast of inventory builds in fourth paragraph.)This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.