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The announcement of an agreement between the United States and Iran caused immediate relief in energy markets. After more than three months of war in the Middle East and a prolonged closure of the Strait of Hormuz, the crossing point for 20% of hydrocarbon exports, oil prices have begun to decline sharply. Brent oil fell below $80 on Tuesday, June 16, for the first time since March.
The memorandum of understanding between Washington and Tehran which is to be signed on Friday June 19 provides for the complete reopening of the Strait of Hormuz. The executive director of the International Energy Agency (IEA), Fatih Birol, welcomed “great news for global economy and energy markets”, calling for a “total and unconditional reopening” of the strait so that hydrocarbons can “start flowing again to Asia and beyond”.
According to the IEA, the conflict caused the most serious energy disruption on record, with more than 14 million barrels per day removed from the global market for several weeks.
An uncertainty that remains
Motorists are already starting to feel the effects of this announcement. In France, diesel has fallen below the symbolic bar of 2 euros per liter. If prices at the pump are expected to continue to fall in the coming weeks, a rapid return to pre-crisis levels seems unlikely. The agreement between the United States and Iran remains preliminary. An additional 60-day negotiation period must still allow the terms to be clarified.
Above all, the resumption of maritime traffic will not be instantaneous. Dozens of tankers remain immobilized and shipowners are waiting for security guarantees before resuming normal traffic in the area. “It could take at least two weeks, even a month,” he said.Financial Times, le Managing Director of the Japanese company Mitsui OSK Lines, one of the three largest Japanese shipping companies.Â
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Fuels: Philippe Casbas is the guest of RTL Petit Matin
00:05:46
Guest of RTL Tuesday June 16, the new president of Ufip Énergies et Mobilités, Philippe Casbas, explains that the financial markets did not wait for the official signing of the agreement to fall. “The markets have anticipated the announcement of an agreement since last week (…) The price of a barrel has started to begin to fall,” he explains.
The representative of the oil industry, however, calls for caution. “It is necessary to secure the strait. It is not simply a question of making a publicity statement. The tankers must be able to pass safely.” For him, the drop in prices at the pump is well underway. “Mechanically, if crude oil falls, prices at the pump will fall,” he assures. But he refuses to make any predictions on the exact timetable for a return to pre-war prices.
Damaged refineries
During the conflict, drone and missile attacks have not only disrupted crude exports, they have also affected refining infrastructure in several Gulf countries, as well as gas and petrochemical facilities. According to the International Energy Agency, more than 14 million barrels per day of oil production remain suspended, i.e. nearly 14% of global demand.
Refineries were damaged in Saudi Arabia, Iraq, Israel and Iran. Others were stopped preventively due to lack of available oil or as a security measure. According to specialists cited byReutersGulf refineries should only return to around 95% of their capacities within 40 to 60 days. Full repairs could require several additional months and tens of billions of dollars of investment.
Global stocks to replenish
During the months of closure of the Strait of Hormuz, consumer countries drew massively on their strategic reserves. In a report published Wednesday June 17, the International Energy Agency indicates that oil stocks in OECD countries have reached their lowest level since 1990. “Despite the significant drop in demand for oil (…), reserves continue to erode at a record rate,” she explains.
Once flows are restored, the United States and oil companies will seek to replenish these reserves. Part of the oil put back on the market will therefore not be immediately available for current consumption. This additional demand risks maintaining pressure on prices, even if they remain on a downward trend.
Barring further geopolitical deterioration, motorists should see their bills reduce this summer. On the other hand, quickly returning to pre-war prices is still, for the moment, a matter of crystal ball research.
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