Oil & Energy
Oil Seen Swinging on US-Iran Deal Hopes, Structural Tightness Persists, Macquarie Says
Global oil markets could face a sharp, short-lived sell-off followed by a gradual rebalancing if a US-Iran agreement materializes, Macquarie strategists said in a note on Tuesday, adding that logistical constraints and stock dynamics may hamper a clean resolution of recent supply shocks.Though details of the possible deal remain limited, Macquarie analysts said reports suggest a 60-day extension of the ceasefire, reciprocal measures to reopen the Strait of Hormuz, and subsequent negotiations over nuclear issues.While markets have begun to price in easing geopolitical risk, analysts said past episodes suggest investors may discount political announcements in the absence of formal Iranian confirmation.Macquarie, in a base-case scenario, sees oil falling to about $20 per barrel within a week if markets accept the deal as credible, followed by a two-week consolidation phase.The bank said a subsequent repricing, driven by logistical and financial constraints, could emerge as vessel flows and storage dynamics adjust.However, Macquarie expects this would ultimately lead to an overshoot on the downside as supply returns faster than demand rebalances, before prices stabilize within a fair-value range of $65/bbl to 70/bbl.Macquarie, in its more cautious scenario, assumes a slower grind lower, with a $10 decline rather than $20, as incremental positive headlines accumulate without a fully signed agreement. The analysts said in that case, markets could retain a $5-$10 geopolitical premium until a clearer resolution.The bank said the key transmission mechanism for any de-escalation would be physical flows rather than headlines.It estimates that clearing Gulf shipping backlogs and normalizing tanker routes could take two to four weeks, followed by another two to four weeks for flows to approach full capacity, contingent on trust in safe passage through the Strait.Restarting energy infrastructure across the Arabian Gulf would mark key milestones, with Saudi Arabia expected to restore output quickly, while scrutiny is likely to focus on recovery timelines in Kuwait and Iraq.Logistically complex assets, including LNG and refining operations, could provide key signals of normalization.However, despite disruption risks, Macquarie said there is a significant buffer in global oil inventories and floating storage, which has helped cushion markets during recent supply shocks.The bank forecasts that 150-200 million barrels of crude are currently floating in the Arab Gulf, alongside about 6.5 million barrels of refined products. Of this, about 30% is Saudi-origin and 25% Iranian, with around 60 very large crude carriers and 40 Aframax-class vessels involved.Floating crude stocks in Asia are estimated at 50 million barrels, with a high share of sanctioned vessels, while China has seen a 2.8 million-barrel-per-day reduction in refining runs, partly linked to the conflict. Japan is reported to retain comfortable strategic stockpiles exceeding 90 days of cover.Macquarie said global oil balances remain supported by a combination of pre-existing surplus, strategic petroleum reserve releases, pipeline flexibility, and demand destruction. While Strategic Petroleum Reserve support is expected to continue into July and August, the bank said flows are likely to taper from June.Shock absorbers remain available for at least three months and potentially into the autumn, Macquarie said, adding that these buffers could prevent immediate upside price spikes but also set the stage for delayed volatility once inventories normalize.