End game to the oil rout, page-32

Part of the end game for the oil rout will depend on what happens with Iran and whether or not congress can veto Obama's deal come voting in September.

http://www.theguardian.com/world/20...-why-republican-promises-scrap-may-not-be-met

"Obama has said he will veto any efforts to block the agreement, and Republicans would need 43 House Democrats to band with them in order to achieve the two-thirds majority required to override a presidential veto. Although Democratic lawmakers were cautious in their reaction to the deal last week, it’s unlikely that many of them would buck their own president on what is being viewed as a legacy-defining moment for the Obama White House."

It is likely that September will see the deal passed and I'd say the oil futures markets are factoring that in now. Then we have the presidential elections in November of next year which could see the Iran deal scuttled if the republicans come to power but it will depend on who wins and the global political realities at the time.

http://www.nytimes.com/interactive/2016/us/elections/2016-presidential-candidates.html?_r=0

Jeb Bush has said this

“One thing that I won’t do is just say, as a candidate: ‘I’m going to tear up the agreement on the first day.’ That’s great, that sounds great but maybe you ought to check in with your allies first, maybe you ought to appoint a secretary of state, maybe secretary of defence, you might want to have your team in place, before you take an act like that”

but many of the other republican candidates are all for tearing up the agreement from day one of a new presidency. Then you have the question of Europe the UN and the US's other allies. What will they do should a republican president decide to tear up the agreement. Retaining the sanctions wouldn't work if the rest of the world wasn't behind it, so it won't be easy for any new president to tear up the deal even if they wanted to once it passes congress in September. The fact is that without the rest of the world the oil will still be able to flow. So I suspect that markets will not respond much coming into next November's election. The political reality by then will be that there is no practical way to turn back the clock back.

My feeling is that it will be a combination of the unravelling of the shale oil/gas /bond/debt/hedge position/bubble around the time of the US elections and the realisation that future supplies of oil and gas will be jeopardised unless large CapEx spending on more conventional oceanic basin projects isn't quickly restored that will sway energy markets back into an upwards trajectory (sorry about that sentence).

There will be a day to pile into DLS if it is still around before then.

Eshmun