Oil: Tight Supply-Demand Balance Persists as Iran Talks Heat Up – TD Securities

TD Securities commodity strategists Ryan McKay and Bart Melek note that headlines surrounding heavy trading related to Iran and Oman are influencing energy market sentiment, but they believe crude fundamentals remain tight. According to TD Securities senior commodity strategist Ryan McKay, even with a comprehensive deal and a full reopening of the Strait of Hormuz, oil fundamentals would tighten significantly.

**Persistent Supply-Side Disruptions, Talks Yet to Materialize**

Recent US-Iran negotiations over the Strait of Hormuz have stalled, heightening concerns over long-term disruptions to energy supply. Reports indicate a vessel was struck by an unidentified flying object while departing through the Strait of Hormuz, and Iran also seized an oil tanker linked to the UAE on grounds of violating relevant regulations. Although both Iran and Oman have signaled willingness to discuss reopening shipping routes through the Strait of Hormuz, no formal agreement has been announced so far.

**Demand-Side Support Remains, Tight Balance Hard to Break**

TD Securities strategists emphasize that the tightness in crude fundamentals has not changed despite frequent headlines on potential deals. Market reports show commercial transit volumes through the Strait of Hormuz remain only a fraction of pre-war levels, while the strait handled roughly 20% of global oil supply before the conflict. A substantial supply-side gap, combined with demand-side resilience, keeps the crude market in a tight balance.

**Strategic Implication: Pullbacks May Offer Entry Windows**

In TD Securities' view, price volatility driven by deal-related headlines is more of a short-term sentiment disturbance than a reversal of fundamental trends. Should the market pull back on rising expectations of negotiations, it could instead provide entry opportunities for longs, as even if a deal is ultimately reached, the pace and scale of supply recovery would struggle to quickly fill the current gap.